Saturday, July 7, 2012
From Ireland to Greece: Tragedy and Renewal in the Eurozone Crisis
July 6, 2012
The past several years, I have engaged intensively in research and writing on post-Celtic Tiger Ireland. One thing I frequently hear in Dublin is -- "well, at least we're not Greece." So, after three trips to Ireland in the last half year, I jumped at a chance to visit Greece after the recent elections. What I found is that the two nations have more in common than either would like to admit.
In terms of data (via Eurostat), Ireland is marginally better off -- illustrated by some minor but important recent steps towards market financing of its debt and an increase in American investment over the last year. Yet both are not near the bottoming out of their crisis. Greece, for example, owed at the end of 2011 approximately 165 percent debt relative to its gross domestic product -- Ireland was at about 108 percent. This is better for Ireland, but if Greece were not in the Eurozone, Ireland would only be surpassed by Italy as Europe's worst. In terms of annual deficit, Ireland entered 2012 worse than Greece - with about an annual deficit of about 13 percent of gross domestic product and Greece at about 9 percent. Greece, on the other hand is deeply mired in depression -- with gross domestic projected to decline by at least 5 percent and projected Irish growth just under 1 percent positive for 2012. In Ireland, however, one has to discount for multinational corporations which pay insufficient tax into the economy and produce few new jobs to sufficiently affect indigenous economic growth. Greece's unemployment is over 20 percent -- while Ireland's has now hit 15 percent. Ireland's would be higher were it not bleeding its talent via emigration. This is particularly evident in youth unemployment (under age 25) which in Greece is over 50 percent, but in Ireland around 30 percent.
Ireland and Greece are mired in the midst of major international bailouts of their economies which are based on unsustainable economic and political assumptions. In both countries, if you are a public sector employee you are being paid with money borrowed from other countries -- mainly Germany. Both countries are caught in enforced austerity via these bailouts. On the other hand, both would have to make massive public sector cuts anyway as their finances had run far behind their social ambitions. Neither have realistic alternatives.