Editorial

“Luck of the Irish” has seemed something of an oxymoron this past year.

The global financial crisis coincided with and compounded the effects of the ending of Ireland’s long, credit-fuelled boom. The result is a series of economic forecasts unparalleled in western Europe in their sheer awfulness. The drop in output this year will almost certainly be in double figures – and it will sink further in 2010. By then, unemployment may well hit 16 percent of the workforce and public debt 80 percent of GDP – in both cases a tripling since 2007. To add to the misery, the government has just received a report recommending €5.3 billion of hugely painful spending cuts.

The fall has been all the more dramatic because of the economic golden era that preceded it. Between 1992 and 2007, Irish growth averaged over six percent per annum. Wage restraint (agreed by unions in exchange for tax cuts) combined with intelligent use of EU money to fund education and training and a corporation tax rate of 12.5 percent proved a winning formula. Investment flooded in; the Celtic Tiger was born.

In some cases, the envy that Ireland engendered elsewhere in Europe spilled over into outright resentment – particularly in countries where the idea of taxing company profits at such a derisory rate would have been politically impossible. And it would perhaps be surprising if there were not just a little Schadenfreude in Brussels at the plight of a once humble country whose sudden wealth had made it just a little cocky – a change that reached its apex with the rejection of the Lisbon Treaty last year. But the EU wants the Irish to appreciate their membership of the bloc not for any cheap satisfaction, but because on October 2 they will be asked to change their minds and give their approval, this time, to the Union’s new set of rules.

As Jamie Smyth writes in our cover story, the signs are that they will: opinion polls have shown a decisive and consistent swing in favour of the treaty. The crisis has thrown into sharp relief the benefits of being part of the EU and of the euro: the European Central Bank is propping up Ireland’s banks to the tune of €130 billion, and the collapse of Iceland’s currency following the end of its own unsustainable credit-driven expansion served as a reminder of what might have been.

Before Ireland’s first vote on Lisbon, E!Sharp predicted a Yes vote – and that there would be no resurrection if the treaty were rejected. Given how things then went, we will this time leave such reflections to those with crystal balls – and limit ourselves to hoping that after October 2 both Ireland and the EU as a whole will be able to give their undivided attention to the more pressing matter of reviving their economies.