Irish economic crisis clouds anniversary

20th January 2009, Comments 0 comments

Lawmakers mark the 90th anniversary of the first meeting of an independent Irish parliament.

Dublin -- Irish leaders had hoped to celebrate a key anniversary this week, but a worsening economic crisis is casting a deep pall over the ailing former Celtic Tiger country.

Lawmakers will mark the 90th anniversary of the first meeting of an independent Irish parliament Tuesday -- but now face the task of passing emergency laws to nationalise the country's third biggest bank.

The Anglo Irish Bank's humiliating takeover by the state on Thursday marked the latest blow to a reeling economy, exactly a week after US computer giant Dell announced it was closing its main European centre in Ireland.

"We have gone from being the envied Celtic Tigers of Europe, all Range Rovers and sunshine villas, to bordering on basket-case status in less time than it takes a bank to evict a family defaulting on a mortgage because the breadwinner has lost their job," the Irish Examiner newspaper said Saturday.

"We are at a sorry, uncharted crossroads. The confidence we once had in our banks is but a memory and our government has yet to convincingly show either the capacity or the backbone needed in these unprecedented and challenging times."

Ireland, which for decades saw young adults emigrate to escape a farm-based economic backwater, transformed itself in the 1990s into a booming economy seen as a model for other small states dreaming of success in the globalised world.

It was envied for a level of prosperity that the republic's founding fathers could never have dreamed of, when Ireland achieved independence from Britain nearly nine decades ago, in 1922.

But now Prime Minister Brian Cowen, who only took over from veteran premier Bertie Ahern last year, is struggling to keep the economy from all-out crisis after it became the first country in the eurozone to go into recession.

The global financial crisis has hammered its open, export-led economy and the state's finances are in serious trouble as jobs haemorrhage and tax revenues plummet.

The downturn has accelerated rapidly. The country has been shocked by the consequent job losses with unemployment surging to a decade decade-high 8.3 percent and jobs vanishing at a rate of more than 5,000 a week.

So far this year the high-profile losses include about 1,900 jobs from Dell going to Poland and another 800 are in question at the iconic Waterford Crystal plant owned by Waterford Wedgwood.

In addition to mounting unemployment, Cowen also faces a wider banking crisis, the worst retail sales figures in 25 years and a currency crisis as the pound sterling nears parity with the euro, hitting Irish exports and tourism as Britain has traditionally been a major trading partner.

Following a series of U-turns on measures introduced in last year's emergency budget, Cowen's fundamental challenge will be his ability to push through painful economic rescue measures.

In a stability report to the European Union earlier this month, the scale of the cuts were itemised. It is planned to save two billion euros in government spending this year, a further four billion euros in both 2010 and 2011, then 3.5 billion euros in 2012 and three billion euros in 2013.

As a result of a "dramatically changed economic situation", the government says the fiscal outlook over the coming years "will be considerably more difficult" than previously envisaged.

"Restoring sustainability to the public finances can only realistically involve a period of adjustment of up to five years," the report said.

The Irish Business and Employers Confederation wants public sector pay cuts and a reduction in the numbers the government employs.

IBEC director of policy Danny McCoy said the "immediate priority for the public finances must be a reduction in day-to-day expenditure."

The unions are opposing any pay cuts or job losses with David Begg, general secretary of the Irish Congress of Trade Unions, saying any attempt to cut pay would "exacerbate" the crisis.

"We cannot be party to an exercise which is designed solely to cut wages and services," he said. "This crisis requires new thinking."

Begg has called for a "National Recovery Bond" as part of new "Social Solidarity Pact" to raise money and for people to "buy into a new plan -- but only if they felt it was fair.


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