This graph illustrates Ireland’s best hope for recovering from its current crisis.
The Celtic Tiger boomed in the 1990s with economic liberalisation. It rose in the economic freedom index of the Heritage Foundation and the Wall Street Journal to rank as the freest economy after Hong Kong and Singapore. Notions that its economic success was due to EU subsidies and interventionist industry policies were misplaced.
Policy errors combined with the unsuitability of EU monetary policy for an overheating economy contributed to the property bubble, bank failures and the debt crisis of recent years. However, Ireland stands a better chance of recovery than some other highly indebted European economies.
Internal devaluation is already working, export growth is strong, and the government has taken tough decisions, including cuts of 10 percent to public sector payrolls.
The biggest risk remains the possible need for further recapitalisation of Ireland’s banks and associated sovereign debt burdens.
The challenge for Ireland is to return to the principles of the Celtic Tiger and achieve growth rates in the next few years that will see its debt levels peak and reverse.
Ireland’s tigerish dynamics – liberalised, young, productive and hi-tech!
Click on the graph to enlarge.