Economy of the Republic of Ireland


Economy of the Republic of Ireland

The economy of the Republic of Ireland is modern and trade-dependent with growth averaging a 7% per annum in 1995–2007. Agriculture, once the most important sector, is now dwarfed by industry, which accounts for 46% of GDP, about 80% of exports, and employs 29% of the labour force. Although exports remain the primary engine for Ireland's robust growth, the economy also benefited from a rise in consumer spending and both construction and business investment. The annual rate of inflation stands at 5.1% as of 2007, up from recent rates of between 3% and 4%. On the EU HICP inflation index, inflation is 2.7% [http://www.finfacts.com/irelandbusinessnews/publish/article_1010769.shtml] , against an EU average of 1.8% . House price inflation has been a particular economic concern (average house price was €251,281 in February 2005). Unemployment is low but is rising [ [http://www.rte.ie/news/2007/0706/jobs.html|Sharp rise in June unemployment] ] and up to 30,000 jobs may be lost between 2007 and 2008 [ [http://www.rte.ie/business/2007/0713/economy.html|30,000 building jobs to go] ] much of which is attributed to a slowdown in house building. Incomes have been rising rapidly [RTÉ Business (23 March 2005). [http://www.rte.ie/business/2005/0323/housing.html House price growth continuing to slow] Retrieved on 5 August 2006.] as well as service charges (utilities, insurance, healthcare, legal representation, etc.). Dublin, the nation's capital, was ranked 16th in a worldwide cost of living survey in 2006 [Finfacts Team (1 February 2006). [http://www.finfacts.com/irelandbusinessnews/publish/article_10004716.shtml Oslo replaces Tokyo as the world's most expensive city; Dublin in 16th place.] News: International. Retrieved on 5 August 2006.] (up from 22nd in 2004 and 24th in 2003). [Finfacts Team (August 2004). [http://www.finfacts.com/costofliving4.htm Plunging dollar makes Europe costlier says Economist Intelligence Unit.] Retrieved on 5 August 2006.]

Ireland has the second highest per capita income of any country in the EU next to Luxembourg, and fourth highest in the world based on measurements of Gross Domestic Product (GDP) per capita. The Gross National Income is $41,140, the seventh highest in the world. The unusually large divergance between GDP and GNI is due to the repatriation of profits by multinational companies [ [http://www.forfas.ie/ncc/reports/ncc_annual_06/ch02/ch02_01.html NCC: 2.1 Income ] ] [ [http://www.rte.ie/business/economyataglance/gdp.html RTÉ Business: ] ] . In any case, the vast majority of wealth held by Irish citizens is invested in property Citation
last = O'Sullivan
first = Patrick
title = The Wealth of the Nation
pages = 6, 9
date = 2007-07-01
publisher = Bank of Ireland
url=http://www.bankofireland.com/includes/about_us_new/pdfs/wealth_nation_3007.pdf
accessdate = 2008-07-13
] . Furthermore, the construction sector accounts for a significant component of Ireland's GDP and GNP and any downturn in this sector is likely to have a profound impactCitation
title = Economic Survey of Ireland 2006: Keeping public finances on track
publisher = OECD
year = 2006
url=http://www.oecd.org/document/50/0,3343,en_33873108_33873500_36173106_1_1_1_1,00.html
accessdate = 2007-07-30
] Citation
title = House slowdown sharper than expected
publisher = RTÉ
date = 2007-08-03
url=http://www.rte.ie/business/2007/0803/economy1.html
accessdate = 2007-08-06
] Citation
title = Latest Report: Latest edition of permanent tsb / ESRI House price index - May 2007
publisher = Permanent TSB, ESRI
url=http://www.permanenttsb.ie/house-price-index/
accessdate = 2007-08-10
] . In 2005, the World Bank measured Ireland's GNI per head at $41,140 - the seventh highest in the world, sixth highest in Western Europe, and the third highest of any EU member state.

History

The state known today as Ireland seceded from the United Kingdom in 1922. The state was troubled by poverty and emigration until the early 1990s. These problems virtually disappeared over the course of that decade, which saw the beginning of unprecedented economic growth, in a phenomenon known as the "Celtic Tiger". Over the past two decades, the Irish government has implemented a series of national economic programmes designed to curb inflation, ease tax burdens, reduce government spending as a percentage of GDP, increase labour force skills, and promote foreign investment. Ireland joined in launching the euro currency system in January 1999 along with ten other European Union countries. The economy felt the impact of the global economic slowdown in 2001, particularly in the high-tech export sector – the growth rate in that area was cut by nearly half. GDP growth continued to be exceptionally high in international terms, with a rate of about 6% in 2001 and 2002 – and it is expected to continue at more than 4 per cent (2006 onwards). Since 2001, GNI (which measures income to Irish residents rather than output) growth has been much slower.

Infrastructure

Ireland's transport infrastructure came under strain due to the economic expansion of the past decade. Since 1993, road transport has been coordinated by the National Roads Authority in the case of the National Primary Routes, which are the most heavily used roads, [Transport Research Laboratory (August 2003). [http://www.nra.ie/PublicationsResources/DownloadableDocumentation/Transportation/file,863,en.PDF Future Traffic Forecasts, 2002-2040] (pdf). National Roads Authority.] The National Secondary Routes act as regional roads and linkages between the primary routes. The Dublin area is served by a light rail network (the Luas), the Dublin Port Tunnel the M50, Dublin Airport, Dublin Suburban Rail and the DART.

Ireland's rail network is run by the semi-state body Iarnród Éireann, a subsidiary of CIÉ and is made up of 9 national lines and several regional commuter lines such as the DART. CIÉ retain some freight customers, though few new freight services have started in recent years. Only some major ports remain technically freight-connected, the connection at Sligo for example was removed in 2003, while the link to Foynes has remained unused since 1999. The efficiency of the train network is poor, with regular delays and overcrowding on major routes. Some regional routes have few services, and as a result, struggle to achieve passengers. Much new rolling stock has been acquired since 1994, and as of 2004, this is finally beginning to expand capacity rather than just replacing old stock. Most major routes have been relaid with continuous welded rail, and signalling has in most cases been upgraded from the more than century-old mechanical semaphores.

The country has a total of 15 airports and airfields, of which 3 - Dublin Airport, Shannon Airport and Cork Airport are of a substantial size. The country is served by several airlines, most notably Aer Lingus, Ryanair, Aer Arann, and CityJet. Air transport is relatively cheap. The main ports are Rosslare Europort, Limerick, Dublin, Cork and Waterford. There are daily ferry services to Britain. In Telecommunications, the deregulated market has ensured that other licenced operators now account for a 32% share of the market. [ Comreg Quarterly Key Data Report. Page 11. Fig 2.1.3. [http://www.comreg.ie/_fileupload/publications/ComReg0767.pdf ] ]

Broadband is now available in Ireland via DSL, Cable, Wireless and Satellite [ Irish Government Broadband Information [http://www.broadband.gov.ie/List+all++Services/] ] . As of November 2007, DSL is available to c. 88% of homes and businesses. Overall takeup of broadband (cable, dsl, wireless etc.) is 15.4% as of July '07 [ OECD broadband penetration and population densities [http://www.oecd.org/dataoecd/21/60/39574903.xls ] ] and there are 698,000 broadband subscriptions as of September ’07 [ Comreg Quarterly Key Data Report. Page 24. Fig 3.3.1. [http://www.comreg.ie/_fileupload/publications/ComReg0767.pdf ] ] The average monthly subscription cost is $40.41, 20% cheaper than the average of $49 for the 35 OECD countries surveyed. [OECD roadband average monthly subscription price, Oct. 2007, USD PPP [ http://www.oecd.org/dataoecd/22/44/39575002.xls ] ]

In 2008 the Minister for Communications Eammon Ryan has announced an unprecedented investment in broadband infrastructure, which will see every household in Ireland capable of receiving broadband speeds of 100mb by 2012. .5% of lines connected to broadband-enabled exchanges cannot avail of DSL, due to distance and other issues. [Sunday Business Post [http://www.thepost.ie/post/text/story.asp?document_id=27065&category_name=COMPUTERS+IN+BUSINESS] ]

There are five mobile telecommunications providers - 3 Ireland, O2 Ireland, Meteor, Tesco Mobile and Vodafone Ireland. The electricity transmission system is run by the Electricity Supply Board and is available nationwide. The gas network is currently being expanded.

"See also: Transportation in Ireland, Rail transport in Ireland, Roads in Ireland, Communications in Ireland,Broadband Internet access in Ireland, Water supply and sanitation in Ireland"

Energy

The vast majority of Irish energy needs are met by fossil fuels. About 98% of Ireland's final energy demand is produced by burning coal, petroleum, peat, or natural gas. This over reliance on fossil fuels - particularly oil - has left Ireland vulnerable to international price fluctuations as it imports all of its oil needs. As part of its National Development Plan the Government adopted the "Sustainable Energy Act (2002)" and created Sustainable Energy Ireland as the nation's energy regulator. As part of their objectives to promote environmentally and economically sustainable energy production, electrical generation from peat consumption, as a percent of total electrical generation, was reduced from 18.8% to 6.1%, between 1990 and 2004.Howley, Martin, Fergal O’Leary, and Brian Ó Gallachóir (January 2006). [http://193.178.1.196/getFile.asp?FC_ID=1067&docID=68 Energy in Ireland 1990 – 2004: Trends, issues, forecasts and indicators] (pdf), p10, 20, 26.] Likewise, coal consumption was reduced from 41.7% to 27.6%. Making up for this, the share of natural gas in electrical generation increased from 26.7% to 44.8%. Renewable energy, from biomass, wind and hydro, also increased from 1.9% to 2.6% in the same time period. A forecast by Sustainable Energy Ireland predicts that oil will no longer be used for electrical generation but natural gas will be dominant at 71.3% of the total share, coal at 9.2%, and renewable energy at 8.2% of the market. Wind power is quickly developing in the country by Airtricity and Hibernia Wind Energy (a subsidiary of the Electricity Supply Board) and many other companies. As of December 2005, there were fifty wind farms operational in Ireland with a combined capacity of 500 MW - generating enough energy for 300,000 homes, depending on wind conditions. In addition, a further 600 MW of wind farms (40 more) have signed connection agreements to link to the power system at high voltage or low voltage, and up to 200 MW of wind farms have received connection offers. Should these reach capacity, Ireland may exceed its EU target of 13.2 per cent of electricity generated from renewable sources by 2010. In addition to wind farms, electricity is also generated at large scale hydro schemes on the Shannon, Erne, Liffey and Lee rivers, and at mini-hydro stations, as well as landfill gas generating plants in Cork and Dublin cities.

;Statistics [CIA (2006). [https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html#Econ Ireland] The World Factbook. Retrieved on 6 August 2006.]
*Electricity production: 23.41 billion kWh (2003)
*Energy production by source: "oil: 55.8%, natural gas: 24.3%, coal: 12.9%; peat: 3.8%; renewables: 2.2%; nuclear: 0% (2004)"
*Electricity consumption: 22.97 billion kWh (2003)
*Electricity exports: 0 (2003)
*Electricity imports: 1.2 billion kWh (2003)
*Oil consumption: 175,600 bbl/day (27,918 m³) per day (2003 est.)
*Natural gas production: 673 million m³ (2003 est.)
*Natural gas consumption: 4.298 billion m³ (2003 est.)
*Natural gas proved reserves: 19.82 billion m³ (As of 1 January 2002)

Monetary system

As the country is a member of the Economic and Monetary Union of the European Union, the euro is the currency. The most common bills in circulation are the €5, €10, €20 and €50; the €100, €200 and €500 bills are rarely seen. The Central Bank and Financial Services Authority of Ireland is the country's central bank and financial services regulator, and an agent for the European Central Bank which sets the interest rates. The low interest rates of the ECB - to stimulate the Eurozone - has helped to sustain the very high growth rate of Ireland, leading to high levels of inflation in the country. For example, increased inflation on housing, from IRE£9,000 (€11,430) in 1973 to €220,000 in 2004 has led to young couples accepting large mortgages and the wealthy buying investment properties. It is arguable that if Ireland had its own currency, interest rates would be higher and inflation would be reduced- however so would economic growth. Fears of overheating (that is excessive growth) of the economy due to the Euro seem to be unfounded, at least up to the present.

While there are over 60 credit institutions incorporated in Ireland, [Department of Finance. [http://www.finance.gov.ie/viewdoc.asp?DocID=808#ch2 Banking in Ireland] Report of the Department of Finance: Central Bank Working Group on Strategic Issues facing the Irish Banking Sector. Retrieved on 7 August 2006.] the banking system is dominated by the Big Four - AIB Bank, Bank of Ireland, Ulster Bank and National Irish Bank. [Adkins, Bernardine and Simon Taylor, (June 2005). [http://www.wragge.com/files/NICompetition_june05.pdf Banks in Northern Ireland face Competition Commission investigation] (pdf). Report & Review.] There is a large Credit Union movement within the country which offers an alternative to the banks. The Irish Stock Exchange is in Dublin, however, due to its small size, many firms also maintain listings on either the London Stock Exchange or the NASDAQ. The insurance industry in Ireland is a leader in both retail markets and corporate customers in the EU, in large part due to the International Financial Services Centre. [International Monetary Fund, (20 February 2001). [http://www.imf.org/external/np/rosc/irl/insur.htm#II Insurance Supervision] Report on the Observance of Standards and Codes (ROSC): Ireland.] Retrieved on 8 August 2006.]

Economic sectors

The Irish economy's secondary and tertiary sectors are of a similar size in fiscal terms however in terms of labour, the tertiary sector is far larger. Similarly in fiscal terms the primary sector appears small, however it still employs about 8% of the workforce.

Primary sector

The primary sector constitutes 5% of Irish GDP, and 8% of Irish employment. Ireland's main economic resource is its large fertile pastures, particularly the midland and southern regions. In 2004, Ireland exported approximately €7.15 billion worth of agri-food and drink (about 8.4% of Ireland's exports), mainly as cattle, beef, and dairy products, and mainly to the United Kingdom. [Bord Bia (March 2005). [http://www.bordbia.ie/industry/sector_profiles/agri-food/index.html Agri-Food Sector - Factsheet] Irish Food Board. Retrieved on 8 August 2006. ] As the European Union's Common Agricultural Policy takes force Ireland's agriculture industry is expected to decline in importance. [Agri Vision 2015Committee, (November 2004). [http://www.agrifood2010.ie/AgriVision2015_PublishedReport.pdf Report of the Agri Vision 2015 Committee] (pdf). p6.] .] where there is 19.82 bn cubic metres of proven reserves.

econdary sector

The secondary sector constitutes 46% of Irish GDP — but only 29% of the labour force. Dominated for many years by textile companies like Fruit of the Loom, the sector is now largely made up of high-tech/high value multi-nationals such as Dell, Intel, Pfizer and IBM. The secondary sector in Ireland manufactures products such as computers (25% of Europe's computers are made in Ireland, the European Headquarters of Apple Computer are in Cork City), computer parts (Intel processors are made in Ireland), drugs (much of Europe's supply of Viagra is made in Cork), confectionery (HB, Jacobs and Cadbury-Schweppes all have significant Irish operations - although Cadbury-Schweppes does not manufacture Schweppes products in Ireland or the UK), beer (the Guinness and Smithwicks, and Harp Lager breweries are located in Ireland), high quality glass and crystal (Waterford Crystal is made in County Waterford), software (Ireland is the world's largest exporter of software - Oracle and Microsoft both have large operations in Dublin) and machinery. The sector faces increasing competition from cheaper Eastern European countries such as Poland and many Asian countries such as the People's Republic of China, particularly in the lower skill areas such as confectionery manufacturing. The industrial production growth rate in 2003 was 6.7%. Over the last decade, construction has become a major component of the economy, currently constituting 9% of economic activity. A recent downturn in residential property market sentiment, combined with the cyclical nature of construction has highlighted the over-exposure of the Irish economy to construction, which now presents a threat to economic growth.

Tertiary sector

The tertiary sector constitutes 49% of Irish GDP and 64% of Irish employment. The tertiary sector is by far the largest driver of modern Irish economic growth — the "Celtic Tiger". It is made up of several industries such as accountancy, legal services, call centres and customer service operations, finance and stock broking, catering, and tourism. Many US firms (such as IBM, Apple Inc., Google and eBay) located their European customer service operations in Ireland due to the availability of a young, highly educated, English speaking workforce. Recruitment agencies also play a major role in this sector, connecting qualified work candidates to business clients looking to hire in these areas. The Irish tourism industry attracts over five million visitors annually and employs over 100,000. The IFSC in Dublin created some 14,000 jobs in the 1990s, all in the high-value finance and legal sectors. The hospitality and retail sectors are quite large — there are hundreds of domestic and foreign retail firms in Ireland (such as Next and Argos), and most cafe and restaurant firms operate in Ireland such as McDonalds, Starbucks, Burger King and Subway.

"See also: Retail in Ireland, Recruitment in Ireland"

tate role in the economy

tate ownership

At present the Irish Government controls several large and key parts of the economy:
*Through Córas Iompair Éireann (CIE) it controls mostFact|date=February 2007 of the bus and all of the railway market. A significant portionFact|date=February 2007 of the scheduled land transport services are accounted for through CIE companies.
*Through the Electricity Supply Board (ESB) the government controls muchFact|date=February 2007 of the electricity generation market, and all of the electricity transmission network.
*Through RTÉ the government control much of the radio and television broadcast sector, although commercial enterprises are gaining market share [ [http://www.rte.ie/about/index2.html About RTÉ ] ] . The state does not generally use the media it owns to spread propaganda, but it has a large financial and regulatory control of the sector.
*Through An Post, the government has a monopoly of the light mail delivery industry and a large portionFact|date=February 2007 of the partially deregulated parcel and express delivery market.

Although the government owns the incumbents in the electricity, mail, broadcasting, land transport and air transport industries, many are wholly or partially open to competition from the private sector. Traditionally large and key sectors of the economy were dominated by government ownership.Fact|date=February 2007 Some of these industries are currently being reformed and opened to competition however some of them are regarded as being slow to adopt change and reform to work practice — work pay and conditions are often much better than that in the private sector with some having overstaffing or underproductivity which is seen as an impediment to reform.Fact|date=February 2007

The government in 2006 privatised Aer Lingus and is currently considering the privatisation of part of the Electricity Supply Board, but it is somewhat reluctant because of an earlier situation that resulted from the privatisation of Eircom.Fact|date=February 2007 In that case, hundreds of thousands of small shareholders lost money, private investors took control and established a virtual monopoly, while under-investment led to a slow roll out of broadband infrastructure.Fact|date=February 2007

Taxation

The present government (1997–) has favoured a low taxation policy to encourage foreign direct investment in Ireland. Consequently, the government opposes moves by the European Commission to restrict tax competition. The previous government of 1994-1997 introduced a corporate tax rate that is only 12.5%, versus between 15% and 60% in the rest of Europe. The income tax system is designed to redistribute wealth from the richer to the poorer segments of society. There are 2 tax bands, based on income levels. These range from a maximum top rate of 41%, to a maximum bottom rate of 20%. In reality, however, a generous tax credits system ensures that the lower rates of taxation are normally 4% to 12%. The top rate of tax never exceeds 35% in practice.

The government receives much of its revenues from taxes on goods — these include a 21% VAT rate on most consumer goods, high levels of excise duty on tobacco, petrol, and alcohol and several smaller taxes on items such as plastic bags, cheques, ATM cards, credit cards and debit cards. The taxes in the personal financial sector, as well as the television licence, are often seen as regressive.

The welfare state

The Irish government runs a Welfare state system. The government provides free tuition for education at all levels for all EU citizens, and free primary and secondary education for all residents. The government also runs the public health service with hospital care free to all and lower earners or people dependent on benefits receive all medical services for no charge, including dental, oral and aural services. Other citizens get all such health services at a reduced/subsidised rate, or can claim tax-relief on medical expenses not covered by the state. People who are unemployed receive unemployment benefits and retired people are entitled to a state pension - both benefits are quite high by international comparisons. However, recent changes in the cost of living in Ireland have greatly eroded their relative buying power. Pension payments were €223.30 per week in 2008.Fact|date=August 2008

Health care

Education

The education system is comparatively very good with standards in mathematics, science and technology being among the highest in OECD member nations. The state has a virtual monopoly in higher education — there are few private colleges and these are highly specialised. The primary and secondary school enrolment levels are over 95% and at these levels choice is wide. Third level entry is competitive; all college and university tuition fees are free and courses adjusted to the needs of the economy. Irish adult literacy is 99% — in line with other OECD countries.

The only recognized universities are Dublin City University, National University of Ireland (with "constituent universities" at Cork, Dublin, Galway and Maynooth), University of Limerick and University of Dublin. The Institute of Technology system has recently overtaken the universities in terms of first year enrolment numbers and this trend appears to be accelerating.

Economic ties

United States

In 2003, trade between Ireland and the United States was worth around $33 billion, a $4 billion increase over 2002. U.S. exports to Ireland were valued at $7.7 billion, an increase of almost $1 billion over 2002. Irish exports to the U.S. were worth some $25.7 billion — a 500% increase since 1997. Ireland had a trade surplus of over $15 billion with the U.S. in 2003. [U.S. Census Bureau. [http://www.census.gov/foreign-trade/balance/c4190.html#2004 Trade with Ireland : 2004.] Trade in Goods (Imports, Exports and Trade Balance) with Ireland. Retrieved on 7 August 2006.] The range of U.S. products imported to Ireland includes electrical components, computers and peripherals, drugs and pharmaceuticals, electrical equipment, and livestock feed. Exports to the United States include alcoholic beverages, chemicals and related products, electronic data processing equipment, electrical machinery, textiles and clothing, and glassware.

U.S. foreign direct investment in Ireland has been particularly important to the growth and modernization of Irish industry since 1980, providing new technology, export capabilities, and employment opportunities. The major U.S. investments in Ireland to date have included multi-billion dollar investments by Intel, Dell, Microsoft, IBM, Wyeth, Google, EMC and Abbott Laboratories. Currently, there are more than 600 U.S. subsidiaries operating in Ireland, employing in excess of 100,000 people and spanning activities from manufacturing of high-tech electronics, computer products, medical supplies, and pharmaceuticals to retailing, banking and finance, and other services. Many U.S. businesses find Ireland an attractive location to manufacture for the EU market, since as a member of the EU it has tariff free access to the European Common Market. Government policies are generally formulated to facilitate trade and inward direct investment. The availability of an educated, well-trained, English-speaking work force and relatively moderate wage costs have been important factors. Ireland offers good long-term growth prospects for U.S. companies under an innovative financial incentive programme, including capital grants and favourable tax treatment, such as a low corporation income tax rate for manufacturing firms and certain financial services firms.Irish firms are now beginning to provide a lot of employment in the U.S., for example indigineous Irish companies, particularly in the high tech sector have provided in excess of 80,000 jobs to date for American citizens.Fact|date=August 2008

European Union

Although the USA is the single most important economic partner, it lags by far the EU as a whole which accounts for 63.3% of Ireland's exports (US 18.7%) and 57.4% of her imports (US 14.1%). (data for 2005) [ [http://www.economist.com/countries/Ireland/profile.cfm?folder=Profile%2DEconomic%20Structure Economist.com | Country Briefings: Ireland ] ] .

Ireland has grown much closer to Europe in recent years — particularly since it joined the European Union (EU) in 1973. It is also part of the EMU and thus has the euro as its currency. Many US companies have located their European headquarters in Ireland and this has led to increased Irish-European ties. Ireland regularly comes near the top in polls of the most enthusiastic Europeans [Coakley , Chris (31 August 2004). [http://futurum2004.eun.org/ww/en/pub/futurum2004/news/enlargement_news/new_year.htm European citizens pessimistic about 2004: poll.] Spring Day in Europe: Enlargement news. Retrieved on 7 August 2006.] and spent some €60m during its presidency of the EU. The EU now accounts for the bulk of Irish trade, with the United Kingdom being the largest trading partner. Ireland's main exports to Europe are beef, computers (Dell, Intel, HP, EMC, Analog Devices and Apple Computer all have manufacturing facilities in Ireland) and software (Oracle and Microsoft have their European Headquarters in Ireland). Ireland's major imports from Europe include cars, machinery, trucks, steel, oil and consumer goods.A major economic bonus Ireland has received from EU membership has been agricultural subsidies from the CAP and large amounts of EU investment in Irish road infrastructure. Since the acceptance of the 10 new Eastern European nations in 2004, Ireland's ties with Europe further increased. Since the accession event in 2004, several hundred thousand workers from countries such as Latvia, Poland and Estonia, no longer requiring work permits, came to live and work in Ireland.

Wealth distribution

Like many Western democracies wealth is partially redistributed among the poorer segments of society through the progressive tax system. Large disparities in wealth exist between those employed and those dependent on welfare payments. The percentage of the population at risk of relative poverty was 21% in 2004 - one of the highest rates in the European Union. [Central Statistics Office, Ireland (June 2006). [http://www.cso.ie/releasespublications/documents/other_releases/2005/progress2005/measuringirelandsprogress.pdf Measuring Ireland's Progress: 2005] (pdf). ISBN 0-7557-7142-7.] Levels of wealth higher than the national average are concentrated among people living in the central eastern region and in Dublin. Despite this, there are many areas in Dublin marked by relative poverty, particularly in the inner city. The poorest members of society are those entirely dependent on welfare payments. Ireland's inequality of income distribution score on the Gini coefficient scale was 30.4 in 2000, slightly below the OECD average of 31. [OECD. [http://stats.oecd.org/WBOS/ViewHTML.aspx?QueryName=186&QueryType=View&Lang=en Country statistical profiles 2006: Ireland.] OECD Statistics. Retrieved on 7 August 2006.] Ireland's 2000 score was less than 9 of the OECD member states but higher than 13 members.

In contrast to most other countries in the European Union (with the exception of the UK, Greece and Hungary) Ireland has high rates of home ownership. In particular, house ownership (at approximately 80%) is the norm. In Continental Europe renting is the norm. Social housing schemes do exist and the government has invested €8.5 billion in the provision of over 34,000 social housing units between 2000 and 2005. Sustained increases in the value of residential property during the 1990s and up to late 2006 was a key factor in the increase in personal wealth in Ireland, with Ireland ranking second only to Japan in personal wealth in 2006. [Finfacts Ireland. [http://www.finfacts.ie/finfactsblog/2007/07/bank-of-irelands-wealth-of-nation.html] . Retrieved on 10 August 2008.] However, residential property values and equities have fallen substantially since the beginning of 2007 and major declines in personal wealth are expected. [Sunday Tribune. [http://www.tribune.ie/business/article/2008/aug/10/boi-postpones-wealth-report/] . Retrieved on 10 August 2008.]

Minimum wage

The national minimum wage is €8.65 per hour for full time staff over the age of 18 — this is one of the highest in the world. From 2007, someone working 39 hours per week at this rate is exempt from income tax, as earned income below €17,600.00 per year is not taxed.

Welfare benefits

As of December 2007, Ireland's net unemployment benefits for long-term unemployed people across four family types (single people, lone parents, single-income couples with and without children) was the third highest of the OECD countries (jointly with Iceland) after Denmark and Switzerland. [Finfacts Ireland. [http://www.finfacts.ie/irishfinancenews/article_1012100.shtml] . Retrieved on 10 August 2008.]

Jobseeker's Allowance or Jobseeker's Benefit for a single person in Ireland is €197.80 per week, as of January 2008. [Citizens Information. [http://www.citizensinformation.ie/categories/social-welfare/social-welfare-payments/unemployed-people/jobseekers-allowance#rates] . Retrieved on 10 August 2008.] This compares to £60.50 (~ €77.20) per week for a single person aged 25 or over in the UK. [Government of the United Kingdom. [http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Employedorlookingforwork/DG_10018757Money, tax and benefits. Retrieved on 10 August 2008.]

State provided old age pensions are also relatively generous in Ireland. The maximum weekly rate for the State Pension (Contributory) is €223.30 for a single pensioner aged between 66 and 80 (€423.30 for a pensioner couple in the same age range). [Citizens Information. [http://www.citizensinformation.ie/categories/social-welfare/social-welfare-payments/older-and-retired-people/oap_contributory#rates] . Retrieved on 10 August 2008.] The maximum weekly rate for the State Pension (Non-Contributory) is €212.00 for a single pensioner aged between 66 and 80 (€352.10 for a pensioner couple in the same age range). [Citizens Information. [http://www.citizensinformation.ie/categories/social-welfare/social-welfare-payments/older-and-retired-people/oap_non_contributory] . Retrieved on 10 August 2008.]

Recent developments

Falls in property values, combined with large reductions in activity and employment in the residential construction sector (which had accounted for a high proportion of economic activity in Ireland in recent years), the impact of the global credit crunch and higher inflation (largely driven by higher fuel and energy costs) have combined to cause major economic uncertainty in Ireland. Government deficits have increased and cutbacks are being made or planned in government spending. Ireland's economy may enter a period of recession. Although many economists are not fully in agreement on this, most believe that Ireland's economy will not recover until 2010 at the earliest. Many economists believe that if the Irish Government manages the downturn properly, Ireland should see growth levels of 2-3% again.Fact|date=October 2008

2008 Financial Crisis

International credit crunch

The international credit crunch presented the first challenge to the Irish financial system- namely a dramatic fall-off in liquidity. As Irish banks depend to a significant extent on the international financial markets for liquidity, this has impacted the banks severely. The Irish government stepped in with a guarantee which effectively granted a triple A rating on the banks' debt, thus freeing up its access to finance.

This step came, of course, at a cost to the Irish taxpayer, in terms of higher national debt repayments due to a greater risk premium that the markets have now placed on Ireland as a whole due to a perceived increase in systematic risk. Furthermore, any bank failure will present major costs to the Irish taxpayer. The government did not take preferred equity stakes in the banks (which dilute shareholder value) or demand that the banks' boards be replaced. As a result, there is now a chance of greater moral hazard in the future which encourages bank executives to engage in riskier activities, in turn, leading to future financial crises. The Irish taxpayer has effectively assumed all the risks of the bailout while banking executives and shareholders have not incurred corresponding losses over and above losses in the stock markets.

Bank solvency

The second and more serious problem, unacknowledged by management of Irish banks, the financial regulator and the Irish government, is solvency. The question concerning solvency has arisen due to domestic problems in the crashing Irish property market. Irish financial institutions have substantial exposure to property developers in their loan portfolio. These property developers are currently suffering from gross over-supply of property, much still unsold, while demand has evaporated. The massive immigration from Eastern Europe which had propped up demand has now reversed due to fewer employment opportunities in Ireland. Irish property developers have also speculated billions of Euros in land parcels such as agricultural land on the outskirts of cities, already valued at "several multiples above" the value of equivalent land in other European countries [cite web
title = Irish Agricultural Land Research
url=http://www.savills.ie/pdfs/articles/166.pdf
date = May 2008
format = pdf
publisher = Savills Hamilton Osbourne King
accessdate = 2008-10-08
] .

Irish banks correctly identify a systematic risk of triggering an even more severe financial crisis in Ireland if they were to call in the loans as they fall due. The loans are subject to terms and conditions, referred to as "covenants". These covenants are being waived [cite web
last = Oliver
first = Emmet
title = New waive of Irish banking
url=http://www.tribune.ie/business/news/article/2008/aug/31/new-waive-of-irish-banking/
date = 2008-08-31
publisher = Sunday Tribune
accessdate = 2008-10-01
] by the banks in fear of provoking the (inevitable) bankruptcy of many property developers. In turn, the banks' assets are not being written down correspondingly on their balance sheets. This does not appear to be consistent with the real negative changes taking place in property market fundamentals.

On the 7th of October 2008, Danske Bank wrote off a substantial sum largely due to property-related losses incurred by its Irish subsidiary - National Irish Bank [cite web
coauthors = Simon Carswell, Fiona Reddan
title = Another traumatic day for investors in Irish banks
url=http://www.irishtimes.com/newspaper/finance/2008/1008/1223335465924.html
date = 2008-10-07
publisher = Irish Times
accessdate = 2008-10-07
] . No such write downs have been done by the domestically-owned Irish banks.

Incidentally, while over-exposed to the property market, AIB (Allied Irish Banks) is thought be more diversified and to manage risk better than its rivals such as Bank of Ireland and, in particular, PermanentTSB (Irish Life & Permanent) and Anglo Irish Bank. Investments in the Polish banking market represent a gem among AIB's foreign aquisitions. Rumours circulated that Spain's Grupo Santander had expressed an interest in aquiring Bank of Ireland but the acquisition was not undertaken when due diligence had been undertaken. This was subsequently denied by Bank of Ireland [cite web
author = Dan Loughrey, Head of Group Corporate Communications
title = Bank of Ireland Statement
url=http://www.bankofireland.com/press_room/latest_releases/2008/General_Content_1000328.html
date = 2008-09-19
publisher = Bank of Ireland
accessdate = 2008-10-11
] .

Government-backed mortgages

As of 11 October 2008, leaked reports of possible actions by the government [cite web
author = Charlie Weston
title = State mortgage plan for first-time buyers
url=http://www.independent.ie/national-news/state-mortgage-plan-for-firsttime-buyers-1496202.html
date = 2008-10-11
publisher = Irish Independent
accessdate = 2008-10-11
] to artificially prop up the property developers have been revealed. The alleged plan is to provide mortgages of up to EUR 300,000 (over $400,000) of taxpayers money to first time buyers on the condition it "will be restricted to the purchase of new homes only". Yet more capital is being artificially directed to support over-inflated property prices. It is now likely that the crisis will be prolonged as market prices for property will take much longer to return to long term sustainable levels rather than allowing the re-adjustment to take place. A swifter adjustment would have corrected the imbalances more quickly, allowing economic growth to resume.

2009 Budget

on Tuesday, 14th October, the 2009 government will present its 2009 Budget. Current developments point to a deficit of almost €15 billion [cite web
coauthors = Shaun Connolly, Mary Regan, Niamh Hennessy, Geoff Percival
title = Economy's perfect storm
url=http://www.irishexaminer.ie/irishexaminer/pages/story.aspx-qqqg=ireland-qqqm=ireland-qqqa=ireland-qqqid=74580-qqqx=1.asp
date = 2008-10-11
publisher = Irish Examiner
accessdate = 2008-10-11
] which amounts to over 10% of GDP despite European Union rules which oblige member states to keep budget deficits below 3% of GDP. Economist are calling for a stimulus package, however, it is far more likely that public spending will be sharply cut, which may reduce the deficit. Any spending cuts, however, would also aggravate the economic contraction. Considering the rapidly deteriorating fiscal situation, the government could be ill-prepared to honour its guarantee of the entire financial system in Ireland in the event of bank failures occurring.

ee also

* Central Bank of Ireland
* Central Statistics Office
* Companies Registration Office
* Economy of Europe
* Economy of Northern Ireland
* Financial services in the Republic of Ireland
* IDA Ireland
* International Financial Services Centre
* Irish Property Bubble
* Irish Stock Exchange
* Recruitment in Ireland
* Irish topics
* List of Irish companies
* Corporation tax in the Republic of Ireland
* Commemorative coins of Ireland
* Economy of Dublin
* Economy of Cork
* Economy of Limerick

References

Print
* O'Kane, Brian. "Starting a business in Ireland" - Oak Tree Publishing, 1993, 1995, & 2001. ISBN 1-872853-94-3
* O'Grada, Cormac "Rocky Road: Irish Economy Since Independence" - Manchester University Press, 1997. ISBN 0-7190-4584-3
* O'Hearn, Denis. "The Atlantic Economy: Britain, the US and Ireland" - Manchester University Press, 2001. ISBN 0-7190-5974-7
* Burke, Andrew E. "Enterprise and the Irish Economy" - Oak Tree Press in association with Graduate School of Business, University College Dublin, 1995. ISBN 1-86076-004-X

Online
* Jacques-Palmer, Daemon, Me. [http://www.economy.ie/ economy.ie] Irish Economic & Financial Public Learning Centre. Retrieved October 8, 2008
* Burnham, James. [http://www.independent.org/pdf/tir/tir_07_4_burnham.pdf Why Ireland Boomed] Retrieved August 10 2006
* Business Access to State Information and Services [http://www.basis.ie/ Doing business in Ireland] . Retrieved November 11, 2004
* [http://www.cso.ie/ Irish Central Statistics Office] . Retrieved November 11, 2004
* [http://www.finfacts.com/irecon.htm Irish Economy News/Reports] . Retrieved November 11, 2004
* [http://www.esri.ie/content.cfm?t=Irish%20Economy&mid=4 The Economic and Social Research Institute (ESRI)] . Retrieved November 11, 2004
* [http://www.oecd.org/ireland OECD Ireland country page]
* [http://economist.com/surveys/showsurvey.cfm?issue=20041016 The Economist Survey] 16 October 2004
* [http://news.bbc.co.uk/2/hi/europe/4020523.stm BBC Article "Ireland is named 'best country' in the World to live"] 17 November 2004
* [http://www.theglobalguru.com/article.php?id=71&offer=GURU001 Global Investors in Ireland] Nicholas Vardy, November, 2006
* [http://www.cso.ie/statistics/sasunemprates.htm Seasonally Adjusted Standarised Unemployment Rates]
* [http://www.cso.ie/releasespublications/documents/labour_market/current/eusilc.pdf EU Survey on Income and Living Conditions]


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