Game over for Ireland?

Posted on

I’m one of those who challenged the myth of the Celtic Tiger well before Ireland began its spectacular and obvious economic decline. I took no pride in doing so. I am proud to have an Irish passport, an Irish name and to have worked in Ireland.

But the facts spoke for themselves: Ireland was not the claimed economic miracle. And low taxes were not the cause of the boom, although they have undoubtedly exacerbated the cause of the bust. Ireland rose on the back of EU grants, surfed on unregulated debt, skidded on lax regulation and crashed on unsustainable debt secured on land that could never have had the value attributed to it for the purpose of securing unserviceable loans.

Now the market is moving against Ireland: it is all too obvious that it cannot service its debts, debts that were not incurred by its government but by a government that has felt forced to bail out banks that government (incestuously) permitted to grow way beyond the level their capital base, and that of Ireland, could sustain.

What now? I can’t see how Ireland can avoid an EU / IMF bail out. And candidly, if I was living in Ireland that’s what I’d hope for. The scenario cannot be worse than the one that exists. But surely there should be conditions attached? Three come to mind.

The first is that the creditor obligations of the banks that caused this crisis must be rescheduled. How can it be that those creditors get paid in full by the people of Ireland when they took on risk that they should have believed was ring fenced within the limited liability balance sheets of the entities to whom they lent funds?

Second, as a condition of any loans the low tax regime of Ireland — designed to be internationally abusive and successful in achieving that goal — must be reformed. A tax rate of 24% on corporate profits, coupled with controlled foreign company regimes and proper control of tax on the flow of intellectual property rights is a critical condition for any support.

Third, a basic level of continuing service from the Irish government to the people of Ireland has to be agreed or no plan will achieve democratic support.

Is that combination possible? I think and hope so. In which case Ireland may have a future. Maybe it won’t be like ots immediate past. But from what I see that may be no bad thing.