Ireland: Is the Worst Over?
Unfinished homes sit empty on an abandoned housing development in Keshcarrigan, Ireland. Photo by Aidan Crawley/Bloomberg.
Ireland was once one of the poorest countries in Western Europe. Then it went on a tear, became "The Celtic Tiger," and was no longer poor at all. How fast did the average Irish resident prosper? The gross domestic product per person in Ireland from 1980 until 2011 was roughly $22,500. At the end of the boom in 2008 it was about $45,000.
Good things happened. Irish men and women who had left the country to make their fortunes elsewhere came home. Snazzy new buildings rose alongside Dublin's Georgian row houses. Investment money poured in, justifying to Irish leaders the government's years of heavy education funding. Ireland was hot.
When the world economic crisis began Ireland's economy came crashing to earth, and suffered a recession that pushed banks into failure, left new subdivisions and office buildings half completed, drove unemployment to 15 percent, and sent people fleeing again to places like Canada and Australia.
Unemployment is ticking down slowly. A recent sale of Irish debt did not see investors demanding the heavy risk premiums charged the governments of Greece, Italy and Spain. The rate of homeowners losing houses and businesses failing has slowed. Is the worst over? Even with all the losses of recent years Ireland is still richer than it was in the early years of this century, but when deciding how they're doing, the average person doesn't pull out a calculator. He or she thinks about this month's bills, and how much is left over.
At the Dundrum Town Centre shopping mall just outside Dublin it was easy to look at the concourses packed with shoppers on a St. Patrick's Day national holiday and wonder, "What crisis?" But a quick check with those same shoppers showed a sobriety created by bad times. One woman told me she hoped better times were coming, and quickly added that the years of economic distress had made her wary, and she saw her shopping differently. She would now pay cash and wait to make purchases instead of whipping out the credit card.
An employee of the National Health Service taking his son to the movies said government work had not insulated his home from setback. He had suffered wage cuts, but held on to his job. He knew others that hadn't been so lucky. He told me the Irish were a pretty resilient bunch, but sadly noted that once again the country was exporting bright, skilled, young people.
Another man relaxed with a coffee while feeding his 9-month-old daughter who lay contented in a stroller. His home had lost something in the range of 40 percent of its value since he bought it, just before the peak of the boom in 2008. There was no question he would continue to pay the mortgage, as the bankruptcy laws made it difficult to do what so many underwater homeowners had done in America: walk away. He figures it's going to be a long time until his house is close to being worth what he paid for it.
Suburban office parks tell a big part of the story: major American corporations like Microsoft, JPMorgan/Chase and Google live in smart new office buildings. Standing nearby is a 10-story building half-finished when the boom went bust, now sprouting rusting rebar, the wind snapping the plastic sheeting once stretched over its empty floors where the windows were meant to be. In Dublin's trendy Temple Bar the streets are lined with smart new restaurants, and storefronts with For Sale and To Let signs.
Every fresh crisis in the eurozone over another country's debt crisis sends a shiver through the Irish economy. It's fragile recovery craves stability and predictability in interest rates, and its financial sector held its breath in the last week as Cyprus went to wall, crafting an 11th-hour deal that left Cypriots furious, and the Irish finance minister relieved.
The small business sector is expected to pick up some of the slack left in the Irish economy when the Celtic Tiger was declawed. I'll have more on the slow recovery in Ireland later this week here online, and on the PBS NewsHour.