Ireland In Recession | Banking Direct

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Ireland In Recession

The Celtic tiger has turned into a pussycat...its official. Ireland, after a decade or more of break neck economic expansion has slammed on the brakes...and how! It is the first euro zone country to slip into recession and my bet is that it won't be the last...far from it. Everything has turned south...the service sector, manufacturing, construction, financial services and housing. The banks are they latest to fall foul to the global economic meltdown...with some so close to the edge that a state guarantee of their assets was deemed necessary.

The trend in recent year has been the reversal of the out flows of Ireland's best and brightest who lerft in droves in the 70s and 80s for any work they could find. You couldn't walk through Dublin airport without seeing a huge poster begging the brains not to get on the planes back to London and New York after the Christmas holiday to see mammy and daddy has finished. Can this trend reverse once again? It will...if the high tech companies that have called Ireland their European base up stick and jump on an Aer Lingus plane with a one way ticket to Lowtaxville.

Ireland was the jewel of the Euro zone project. The shining beacon to the Baltic States, Poland, and the former soviet republics of Latvia, Lithuania and Estonia all eyed Ireland's remarkable economic turnaround with envy and sweaty, anticipatory palms. "We'll get ours soon" they all thought, as they admired Ireland from a far like a shy teenager admires the prom queen from across a dancehall.

In reality, they are unlikely to get anything close to what Ireland enjoyed, perhaps with the exception of Latvia which enjoys a well educated workforce and low corporation tax rates. Ireland had a convergence of good fortune and a long time in building a solid base for the prosperity it enjoyed. It trained it workforce, build out its infrastructure with the help of EU handouts and was able to push the corporate tax burden onto its well paid citizens while giving its corporate "guests" a bit of a carrot to do business in Ireland in the form of too hard to refuse corporation tax rates.

The bursting of the property bubble and the slump in construction jobs may well signal a different future for Ireland from its boom times. Will the Irish government be able to resist the temptation to increase corporation tax rates...just a little...to soften the blow to the treasury of all those unemployed former boom town builders who now live off state benefits?

If they can't resist, it will ensure that the recession becomes deeper and more profound as the very foundation of the Irish boom, well paying high tech jobs from large US tech companies, shifts from rock to quicksand...just as Latvia welcomes Microsoft and Google executives with open arms, keen workers and empty wallets.