This series about our CNI-partners focuses on the economic situation in participating countries: How do those nations cope with the financial crisis meanwhile? Do national characteristics actually still exist in view of increasing globalisation? Is the way of working in these countries still influenced by national mentalities or rather by globally acting companies?

This year the main topic of our series refers to the question: „Crisis: multinational or international?“ Does this financial crisis perform in the same way regardless of the nation involved, a so-called international crisis or does it cause significant different national consequences, sort of multinational? We take a closer look at the process of the economic crisis in the separate CNI-member-countries and the national measures which were taken against it.

Overview of the Irish Economy

Since 1996, economic output has grown year on year, however in 2007/2008 it became evident that a significant part of this growth has been due to construction activity which was not sustainable. The first visible sign that something was wrong was in 2007 when house sales started to slow and house prices were no longer increasing (house prices grew by 283% from 1996 – 2006)

As is normal in a bubble situation, politicians, property developers and other interest groups such as bankers and construction related services denied that there was a problem and predicted at worse a “soft landing” for the economy. Our banks continued to support construction and development activities despite signs that the property market was overheating.

Roll on to 2009 and the landscape has changed; whilst we were creating our own problems as outlined above, nobody anticipated the global recession hitting us straight on. From a situation where we were patting ourselves on the back, revelling in our achievements (real or imaginary) in the “Celtic Tiger” economy, we are now facing our most severe recession since the foundation of the state.  As an open economy the global recession was going to have a major impact on our economy, however this has been severely compounded due to the lack of leadership by politicians and bank regulators who chose to ignore the signs as long at the tax take remained high and unemployment remained low.

So what is the impact on the man/woman in the street? Experts have forecast that the economy will contract in 2009 by 9% with a further 3% next year. Unemployment is expected to rise to 17% by 2010 whilst average individual income will fall by 9% in 2009. Emigration will start up again after several years of foreign workers moving to Ireland. House prices have fallen approximately 35% since the peak in 2007 and will continue to drop for the foreseeable future. All employees have seen their personal income tax increase by approximately 3% since January. State employees have been hit fairly heavily with additional taxes which were applied to fund the pension deficit. Private sector employees who have been able to retain their jobs have taken pay cuts of 10 – 20% and in many cases agreed to a pay freeze for the next two years. Employment in construction and related services such as lawyers, surveyors, architects, auctioneers etc. has been most severely hit with firms laying off often 30% of their employees. The main domestic banks are expected to lay off large numbers of staff once the picture is clear regarding state recapitalisation.

So is there light at the end of the tunnel? – yes, we know it is going to be tough and we definitely have been given a wake up call, but we have been there before – anyone over 45 still has memories of the nineteen eighties when we had to dig deep to keep the ship steady. We have a strong base of pharmaceutical, medical device, software companies and we are working hard at developing the indigenous sector with a strong emphasis on technology and innovation. In addition we continue to turn out a relatively high percentage of well trained graduates from Universities and Colleges of Technology which we will need if we want to turn everything around.

Have we learned anything in the last year? – Yes

1. We need to continually focus on our competitiveness if we are to survive


2. Without exports we don’t have a viable economy


3. Depending on the “Luck of the Irish” is not enough

Web: www.torc.ie
Contact: Tony Roe