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Countries Can Come Back From the Dead -- Exhibit A, Ireland

While serious questions remain over the cost of obtaining money for Ireland when that moment arrives, the sheer fact that Ireland can now talk about leaving behind its official lenders is highly significant, and not just in Ireland, but further afield.
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Two years ago, almost to the day, I gathered at a gloomy press conference in Dublin to hear the Irish government inform its citizens that for the first time in the nation's history, the State could no longer fund itself and would need an emergency credit line from the IMF and EU.

Outside the venue at Dublin's government buildings, the rain poured down hard and a small band of less-than-vocal protestors paced around outside. A small scattering of police watched over them, but apart from that, there was little drama surrounding the seismic event, which was taking place inside.

In some ways, that was the most surreal element of Ireland's 2010 bailout package -- how little anger, disappointment or frustration was expressed by the populace over its introduction.

In fact, the seeds of its introduction were arguably sown in the 12 months before that, which probably explains the somewhat muted reaction.

But make no mistake, national pride was dented and shock waves also went out across Europe over this event, particularly after a similar bailout had been organized for Greece in that same year.

The conclusion of observers was that Ireland would take years to emerge from the program and possibly only by defaulting on its debts along the way. The feeling about the IMF/EU program was "Once in, never out".

However, in recent weeks, the Irish government has started talking -- in a reserved fashion -- about exiting the program and re-entering the bond market, at the latter end of next year.

While serious questions remain over the cost of obtaining money for Ireland when that moment arrives, the sheer fact that Ireland can now talk about leaving behind its official lenders is highly significant, and not just in Ireland, but further afield.

There is a strong economic argument raging at present in universities, think tanks and in the world of journalism about whether austerity (meaning in this instance, higher taxes and lower spending) actually works in terms of reviving a national economy. Or as the economists like to ask: Is there really something called expansionary austerity?

Well, Ireland may hold some lessons on that front.

That is why Ireland's ability to leave the IMF/EU program by instead luring bond investors back in again matters a great deal.

Ireland has cut spending very sharply in recent years and the marginal rate of personal taxation has also risen to help that adjustment to happen. Ireland has also taken huge costs out of its economic offering to international investors, thereby boosting foreign direct investment considerably. The agency I work for, IDA Ireland, helped create 13,000 new jobs last year, all of them provided by foreign companies happy to take a bet on Ireland's long-term stability.

Of course, some will point to Ireland's unemployment problem and continuing mortgage crisis to show that the recent adjustments are not working, but of course, both these problems were built into the Irish economy long before now, with the seeds of the mortgage problem planted pre-2008.

Meanwhile, the unemployment crisis has in large part been caused by the collapse of the construction industry, which began in 2008/2009.

Either way, sentiment has changed rapidly since that rainy night in 2010 and investors and commentators are now creating a new type of sentiment themselves. Ireland was recently featured on the front of Time, with the author of their cover story, suggesting the rest of Europe can learn from the "Celtic Comeback," as the publication chose to put it.

Obviously, tough times are very much still present in Ireland.

Unemployment remains a top priority and a new deal on Ireland's legacy bank debt is also being pursued at the top levels in Europe. But one can only ultimately measure where one has come from, and in two years, Ireland, and by extension Europe, has made at least some decent progress with the countries who needed assistance during those dramatic days. (Clearly Greece has some deeper problems to address.)

What progress has been made has been dependent on the core structure of each economy.

Ireland's economy rests nowadays firmly on exporting, trade and cost competitiveness.

While Ireland is not perfect in any of these areas, the government here recognizes that an export and FDI-led future economic model is worth embracing.

Foreign investors are taking the same view and that can only be good for Europe, which doesn't currently have too many even modest success stories to tell the world about.

Emmet Oliver is a former senior financial journalist from Ireland and chief spokesman for the Irish foreign investment agency, IDA Ireland.

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