Thursday, September 25, 2008

Irish Economy: Bright Hopes, But Cause for Concern

On Saturday, September 20, 2008, the Virginia State Board of the Ancient Order of Hibernians in America ("A.O.H.") was host to a most interesting and insightful presentation by Mr. Laurence Simms, Economic Officer at the Embassy of Ireland. Mr. Hugh P. O'Brien, Chairman of the A.O.H. State "Buy Irish" committee, arranged the talk. The presentation was given at the Knights of Columbus hall in Arlington, Virginia. The morning talk followed the State Board meeting, and was attended by members of the A.O.H. and L.A.O.H. (Ladies Ancient Order of Hibernians).

According to Mr. Simms, the Irish economy has been enjoying an economic rebirth, attributing this to upgrading education, and membership in the European Economic Union. This helped detach the Republic from the British economy, resulting in a more diversified economy for Ireland. As a result, the "Celtic Tiger" has been experiencing significant growth over the past few years, and has enjoyed one of the higher rates of growth in the European Union.

Mr. Simms noted that Ireland has many factors that make it attractive to American investment, including a highly educated workforce, a common language, and openness to international trade. A low corporate tax rate is also a strong incentive to foreign investment. There has been between 4% to 15% growth on the average, and there has been a great deal of investment in physical infrastructure, especially roads.

The recent financial meltdown in the United States, however, initiated by the sub-prime mortgage crisis, has had a serious effect on the Irish economy, as well as many others throughout the world. Growth rates are slowing, although the fundamentals remain strong.

There is thus a great deal of concern, particularly with the fluid situation in the U.S. Housing prices are still in a slide, and this has resulted in a significant decrease in government revenue. The new budget reflects this downturn, and there will be substantial cuts in all sectors, even in the face of the need to lower debt. Spending habits built up during years of surpluses must be changed in light of the projected deficits. The government is working to bring together unions and workers, and coming up with national wage programs, with the goal of reaching a national wage agreement.

It thus seems evident that the government of Ireland would benefit greatly from a study of the proposed "Homeowners' Equity Corporation" to address the immediate situation, and work to implement a Capital Homestead Act in the mid- to long-term.

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