As of November Ireland joined the ranks of Greece and Portugal as the latest European country to accept a bailout. The country’s economic crisis of 2008 led individuals and companies to begin pulling their funds from Irish banks, with net result of 70 billion euros withdrawn in 2010.
The proposed $113 billion IMF loan prompted protests in Dublin, says The Guardian. Not unexpectedly, some are viewing Ireland's economic situation as part of one homogenous crisis.
But is it really logical to group Ireland troubles with Greece, Spain and Portugal? Given the domino effect occurring in Europe concerning bailouts, the parallels seem unavoidable, however The Financial Times finds the comparison illogical.
Ireland is nothing like Greece. Back in 2007, Ireland’s net public debt was just 12 percent of gross domestic product. This compares with 50 percent in Germany and 80 percent in Greece. Spain, too, had net public debt in 2007 at just 27 percent of GDP."
Ireland in reality is unlike the other European nations that have accepted bailouts. As The New Yorker explains, Ireland’s economy went sour for different reasons than Greece and Portugal. A combination of the property market’s collapse and bailing out the banks sent Ireland into this economic pit.
It’s more realistic to compare Ireland with Iceland, argues a recent article from The Economist. The article suggests the government of Ireland would do well to learn from the more conservative approach taken by Iceland's government in repairing their economy. Iceland didn’t elect to bail out its banks and saw a 15-percent drop in GDP, compared with Ireland's 14-precent drop in GDP despite bailing out their banks. Iceland, however, not being a member-country of the European Union was spared the political pressure the government of Ireland felt to accept an IMF bailout.
Ireland's economic issues, according to The New Yorker, have shown that their membership to the EU may very well be their plight. And in reality the advice streaming from Germany, France and the United Kingdom has been of little help. Cutting government spending and raising taxes reduces demand in the economy, which makes recessions worse, explains The New Yorker.
Ireland doesn't have an economy that will yield positive results from the advice dispensed by their European counterparts according to. NPR notes that when a nation as small as Ireland — with a population 4 million — has an unemployment rate of 14 percent, it makes a noticeable dent in the workforce [discuss]. According to The New Yorker, the country is in dire need of both foreign and government investment to create jobs and combat unemployment. Unfortunately neither are possible given Ireland's shaky economic condition and the government's consistent inability to stabilize the crisis.
Yesterday, the The Financial Times wrote about plans to sell Ireland's debt in the form of euro zone bonds. But will this really stem the crisis? The Financial Times argues that instead of improving the situation, this will put other euro zone members attempting to sell their bonds at a disadvantage.