Part A: Company Matters

1.0

Introduction

There were many interpretations about Celtic Tiger back then. However, all of them brought the same meaning. Celtic Tiger is a term used to describe the economy of Ireland during a period of rapid economic growth from 19952007, which underwent a dramatic reversal by 2008. The term is a variation on "Asian Tiger", a reference to Asia's economic growth. Since 2004, many economists have referred to Ireland's economy as Celtic Tiger 2 because of the country's resurgence on the world stage. Ireland was one of Europes poorest countries for more than two centuries. Yet, during the 1990s, Ireland achieved a remarkable rate of economic growth. By the end of the decade, its GDP per capita stood at $25,500 (in terms of purchasing power parity), higher than both the United Kingdom at $22,300, and Germany at $23,500 (Economist Intelligence Unit [EIU] 2000: 25). In 1987, Irelands GDP per capita was only 63 percent of the United Kingdoms (The

Economist 1997). As Figure 1 shows, almost all of the catching up occurred in a little over a
decade. From 1990 through 1995, Irelands GDP increased at an average rate of 5.14 percent per year, and from 1996 through 2000, GDP increased at an average rate of 9.66 percent (International Monetary Fund 2001). Most theories of economic growth can be dismissed as an explanation for the rapid growth of the Irish economy. Rather, a general tendency of many policies to increase economic freedom has caused Irelands economy to grow rapidly. This nickname given for Ireland during its uprising years of the late 1990s, when it enjoyed an average annual growth rate of over 6.5%. The first boom was in the late 1990s when investors in which many of them were tech firms poured in, drawn by the country's favorable tax rates, some as much as 20-50% lower than the rest of Europe. It ended with the bursting of the internet bubble in 2001. The second boom in 2004 was largely the result of Ireland opening its doors to workers from new European member nations. Increased in house prices, continued investment by multinationals, growth in jobs and tourism, a resurgence of the information and technology industry and the United States economic recovery have all been cited as contributing factors for the revival. In just over a 1

generation, Ireland has evolved from one of the poorest countries in Western Europe to one of the most successful. It has reversed the persistent emigration of its best and brightest and achieved an enviable reputation as a thriving, knowledge-driven economy. As a result of sustained efforts over many years, the past of declining population, poor living standards, and economic stagnation has been left behind. Ireland now has the second highest gross domestic product (GDP) per capita within the European Union (after Luxembourg), onethird higher than the has achieved EU-25 average, and exceptional growth.

Figure 1: Chart of Employment by Sector and Unemployment

One of the biggest successes of the Irish economy has been new job creation. From 1990 to 2005, employment soared from 1.1 million to 1.9 million. Economic growth, more jobs, and rising living standards meant the resolution of the emigration problem, which had bedeviled Ireland for generations.

The population increased by almost 15 percent from 1996 to 2005 in a striking reversal of previous trends. In one year alone (July 2004-June 2005), employment increased by 5 percent. Ireland is now seen as the land of opportunity by many workers from the 10 newest EU member states. Its unemployment rate of 4.4 percent is less than half the EU average. Public budgets are in balance, and foreign investment was equivalent to 17 percent of GDP in 2003. 2

Ireland achieved this success through a combination of sensible policies and pragmatism. At the heart of these policies was a belief in economic openness to global markets, low tax rates, and investment in education. While economic success over the past 15 years can be ascribed to a range of domestic and international factors, it was not a fluke. Ireland has long had, and intends to sustain, low tax rates to attract investment. Its current 12.5 percent corporate tax rate evolved from the zero rate on export sales in the 1950s and the 10 percent rate on manufacturing and some internationally traded services introduced in 1980. Ireland's transformation was national in scope, with individuals, businesses, institutions, and government sharing the same ambition. It involved parents deciding that their children would have choices that they did not have and would not be forced to leave their home communities because of economic necessity. Political decisions were driven and sustained by the public will for success. There were some deviations from sensible policies at times, but through the many difficult years, the threads of consistent development can be seen.

The Fall Unsolved, the underlying economic problems of the 1970s rolled over into the 1980s, producing disappointment. The causes were the return of high unemployment, emigration, steady worsening of the public finances, and the seeming inability of any government to manage the nation's affairs and find a solution to the worsening situation. The atmosphere of the 1980s was more redolent of the dark years of the 1950s than of the optimism that had permeated the two decades in between. The feeling of failure was exacerbated by the waves of emigration of young people, just as in a generation earlier. Whole classes of university graduates would frequently leave the country. There was a disheartening drain of human capital. A net 200,000 people left from 1981 to 1990. In the worst years, more than 1 percent of the country's population fled. This was not what the policies of the previous 25 years had been designed to achieve. What had gone wrong? A number of internal and external factors were conspiring to slow down progress and undermine confidence. Global conditions were weaker after the oil shocks of the 1970s. The momentum from EEC entry had faded. Persistent inflation averaged close to 11 percent per

year between 1981 and 1986. Jobs created by new foreign investment, while substantial, were inadequate to employ the growing workforce and counter the failure rate of older businesses. Attempts at government intervention proved to be no better. Continued increases in public spending, tax increases, and deficit financing through borrowing soured the investment climate and failed to raise employment while increasing the drag on the underperforming economy. 2.0 The Rise of Celtic Tiger

The starting of the Celtic Tiger dated back to 1950's when Ireland appeared to be in terminal decline with an average of 50,000 emigrating each year. In 1950, the Industrial Development Authority was established as an independent State agency and in the interval, IDA Ireland has shown what State employees can achieve when freed of the cobwebs of civil service bureaucracy. In 1955, the Minister for Finance Gerard Sweetman appointed the 39-year old Thomas Kenneth Whitaker as Secretary of the Department of Finance. The 1956 budget that was introduced by Sweetman proposed a tax exemption on profits from exports. It had Whitaker's imprint and in the following year, that was marked by the creation of the European Economic Community, he began work on the seminal paper Economic Development. He was focused on preparing the Irish economy that had been so linked with the UK's, for eventual membership of the new six-country member European body.

Whitaker's paper was the blueprint for the move from protectionism to free trade and the modernisation of the economy through the incentivising of multinational companies via tax breaks establish operations in and grants, Ireland. to manufacturing

Figure 2: Chart of Irelands economic growth since 1970 until 2004.

Sean Lemass, the Deputy Prime Minister and Minister for Industry and Commerce from mid-1957, was a strong supporter of Whitaker's blueprint despite opposition from business and trade union interests and it became the basis of the First Programme for Economic Development. In 1959, Lemass became the Prime Minister. In the same year, the Shannon Industrial Free Zone opened at Shannon Airport in south-west Ireland and American companies began opening assembly facilities in the zone. In 1961, Ireland applied for membership of the European Economic Community which proceeded without success. Two years later, the State visited by President John F. Kennedy, the great-grandson of Irish emigrants, set the seal on the new modernising Irish economy as prosperity began to reverse the tide of emigration. In January 1973, Ireland joined the then European Economic Community. In October of that year, unemployment fell to 63,000 and another Middle East War ushered in an oil embargo and a quadrupling of oil prices. Inflation shot up to double digit levels and governments lost

control of public spending, emigration resumed and negated the positive impact of the membership of the EEC. Between 1977 and 1981, the combination of tax cuts with huge spending increases (in the single year 1979, the public service pay bill was increased by 34%), resulted in a trebling of the National Debt. The continued success in building up the base of foreign companies, the opening of a financial services centre in Dublin in the late 1980's, eventual political courage and cross-party support to control public finances, large structural funds transfers from Europe and a favourable demographic factor with a young educated population, coincided with the take-off of the American economy from the mid-1990's and the Celtic Tiger was born. Dr. Garret FitzGerald has written in the Irish Times that during the brief Celtic Tiger period from 1993 to 2001, European living standards rose by one-half. But this was due to two special factors - both of which were essentially temporary in character. The first was the impact upon our national productivity of a quite exceptional inflow of new US investment. For a number of years Ireland, with only 1% of Europe's population, attracted up to 25 per cent of all US greenfield industrial investment in European continent. The new technology and skills that this inflow brought contributed to a 4% annual increase in output per worker at national level, with increased productivity. The second factor, which played an even larger role in boosting European living standards during that time was the huge increase in the total number of people at work, and the corresponding drop in the proportion of dependants in European population. Several factors contributed to this such as the exceptional inflows of young workers emerging from the educational system and of women transferring from home-duties to the labour force, and also the flow of unemployed people returning to work and of recent emigrants coming back to jobs here. Within a decade these inflows into European labour-force reduced from 230 to 115 the number of dependants that every 100 workers had to support, either directly within their families or indirectly through taxation.

FitzGerald wrote that the huge increase in the proportion of European population engaged in work, and the consequential drop in their dependency ratio, more rapid than had ever previously been seen anywhere in Europe in peacetime which accounted for more than half of the improvement in European living standards. However, that extraordinary combination of productivity growth and reduced dependency, which distinguished the 1990s in Ireland from any other decade, was a temporary phenomenon. FitzGerald also wrote that in future, European standard of living is likely to rise much more slowly than they became accustomed to during the 1990s. However, he did not thought that with most people this particular penny has yet dropped. Since the end of 2003, output per worker in Ireland has been almost static. It seems to have risen by only 1% in 2004 and not at all in 2005. Even if the CSO was in due course to revise upwards its current estimates of economic growth in those two years, which was quite possible, any such revision was unlikely to be on a scale that would show any appreciable rise in productivity. In the absence of improvements in output per worker, the current spending spree, financed by borrowing, could not continue indefinitely. On top of the uncertainty created by European huge growth in dwelling construction, this new factor introduced a further element of uncertainty into their economic prospects in the latter part of the current decade.

The rise of the Celtic Tiger much observed with these actions taken by the Irish in order to improve the Irelands economy. 1922-1932 the first decade of independence with a continuation of existing policies. Independent Irish currency was established in 1927 which kept at a one-to-one parity with sterling. 1932-1938 there was an economic war with the United Kindgom and an attempt to build infant industries behind high tariff walls. The Control of Manufacturers Acts were introduced prohibiting the ownership of Irish industry by foreigners. 1939-1945 World War II during which Ireland remained neutral. 1946-1957 the period of economic stagnation marked by heavy emigration which netted averaging over 40,000 during 1950s. 1957 the removal of the Control Manufacturers Acts. 1973 Ireland joined the European Economic Community. 1977-1981 expansionary macroeconomic policy used in an attempt to provide full employment. This policy, which resulted in the Public Sector Borrowing Requirement (PSBR) constituting over 20% of GNP, failed, creating balance payments problems and pushed the public sector debted up to 120% of GNP. During this period of fiscal excess, Ireland joined the European Monetary System in 1978. 1979 After joined ERM and EMS, the Irish pounds one-to-one parity with sterling was broken in March 1979. 1981-1986 attempts at fiscal retrenchment largely aborted by conflicts amongst the partners of the Coalition governments of the period. 1987 Fiscal rentrenchment introduced. The International Financail Services Centre launched. 1988 the first tax amnesty established. This helped reducing significantly the budget deficit and the PSBR. 1992 Ireland signed up for the first phase of EMU at Maastricht. Abolition of exchange control regulations. 1992/ 1993 exchange rate crises. Devaluation of the Irish pound (Jan 1993) and moved to wider exchange rate bands (15% +/-). 1999 Ireland in the EMU.

3.0

Financial Innovation and Ideology

At the heart of the concept of actually existing neoliberalism is the notion that proto neoliberalism is an economic experiment which has become woven into localities in different ways as a consequence of their unique social, cultural, economic, political, and institutional histories. Brenner and Theodore (2002, page 351) note the path-dependent nature of neoliberal restructuring projects insofar as they have been produced within national, regional, and local contexts dened by the legacies of inherited institutional frameworks, policy regimes, regulatory practices and political struggles. In these divergent contexts they have identied key moments of what they call creative destruction, involving the dismantling of particular institutional forms and the construction of new (de)regulatory apparatus. Other strands of work have argued for understanding neoliberalism in terms of govern mentalities (Larner, 2000), and as a mobile technology (Ong, 2007). England and Ward (2007, page 8) suggest that there are important similarities, discursively and materially in the restructuring of markets for currency, energy, public services, transportation and so on, which highlight the shared characteristics of state neoliberalisation, but that the contingency of the project on place-specic market and regulatory structures means that it cannot be theorised as a coherent set of global processes.

The propagation of the ideology of neoliberalism, of course, betrays a long and colourful history. For instance, and representing only one example, before crashing onto the shores of both the United Kingdom and the United States in the 1980s in the guise of Thatcherism and Reaganism, neoliberalism was long experimented with and rened and rejigged in the context of Structural Adjustment Programmes imposed by the IMF on bankrupt nations in the developing world. There is certainly a tradition of scholarship which has preserved an interest in these multiple past and present laboratories. But it might also be argued that recent work within Anglo-American geography has tended to prioritise a limited number of case-study sites, both spatially and temporally. Firstly, Brenner and Theodores (2002) assertion that the urban scale now constitutes the most appropriate entry point for empirical explorations of the grounding of neoliberalism in concrete histories and geographies has generated a disproportionate drift in interest towards the (Western) city. Secondly, to date, the principal antecedent context has been the Fordist Keynesian welfare state. Neoliberalism has generated a period of creative destruction and has junked, metamorphosed, and recalibrated previous Fordist Keynesian institutions. And much recent work has sought to develop the New Urban 9

Politics literature to map a purported epochal transition in urban governance from urban managerialism to urban entrepreneurialism (Cox, 1993; Cox and Mair, 1989; Hall and Hubbard, 1996; Harvey, 1989).

Arguably, the development of the concept of actually existing neoliberalism has been animated, but also limited, by the selective eld sites which Anglo-American geographers have chosen to work on. The Irish case endorses the need for a consideration of a wider range of scales of analyses and spaces and places and an appreciation of prior histories in the longue dure and a deeper reach into the past. Our proposition is that Irelands interlacing with neoliberal ideology has been mediated largely by institutions operating at the level of the nation-state and within a particular political culture and system inected by the long history of Anglo Irish relations and the countrys emergence as an independent postcolonial state. In this sense the Irish case can be read as an exemplar of a much wider and richer historical geography of encounter between neoliberal ideology and the postcolonial legacy. We propose that Irelands neoliberal model has been shaped by at least four important historical factors.

First, British colonisation of Ireland, and annexation through plantation, has created a long history of conict in Ireland over ownership and propriatorial control over land and property. Historically, various strands of Irish cultural and political nationalism and Irish Republicanism foregrounded land and property ownership and land reform as central to their mission. Irish cultural and political life is thus marked by a erce and combative defence of the rights of the citizenry to exercise almost complete freedom and autonomy over land and property. Moreover, any such tendencies were compounded by the housing policies of successive governments after 1922, which, rather than adequately tackling social housing conditions, subsidised private-sector developers and mortgage lenders, therefore gradually pushing larger sections of the population into owner-occupation (see McCabe, 2011).

Second, living under the yoke of British political control, the Irish political model developed in ways which privileged local social relations and, in particular, a clientalistic and patronage species of politics. The craft of votes for favour and graft were honed in the rural Irish village and through time became sedimented and naturalised. The result is that Irish politics is marked by a triumph of local politics over party and national politics (see Collins and 10

Cradden, 1997). This has been combined with a highly centralised bureaucracy inherited from the former British colonial administration (Breathnach, 2010, page 1186). Moreover, local politicians wield power in ways which have actively subordinated the Irish planning system. As a result, Irish planning has never achieved the same status as has planning in much of Europe, and has always been weakened and compromised by localism, cronyism, and corrupt political practices.

Third, although Irish nationalism was infused with strains of Marxist and socialist politics, arguably Irelands revolution was one of the most conservative in modern history. Since Independence Irish political life has been dominated by the oscillating fortunes of two hegemonic, right-of-centre and conservative, nationalist parties: Fianna Fail and Fine Gael. These parties were formed out of the Irish Civil War and re ect not left and right divisions in ideology but protreaty and antitreaty sentiments at the time of Independence. Irish political cleavages, then, for the most part do not pivot around ideological differences.

Fourth, in the years immediately following Irish Independence, Irelands principal economic policy was one of import substitution. External capital was to be heavily regulated, limited, and policed, and domestic industries were to be nurtured and protected. By the late 1950s it was becoming evident that this model had impoverished, and continued to impoverish, Ireland. From the 1960s on Ireland embraced a model of a liberal and open economy and aggressively sought to court export-oriented manufacturing, piloting and adopting policies which would later be labelled neoliberal.

These four factors shaping the Irish political landscape have produced a certain species of neoliberalism in Ireland which is perhaps best characterised as ideologically concealed, piecemeal, serendipitous, pragmatic, and commonsensical. Indeed, successive Irish governments have never had an explicit neoliberal ideology (apart from a small number of in uential ministers) (Kirby, 2010). Ideology thus remains largely hidden in the apparatus of Irish politics. Its presence is barely articulated and often invisible. And yet Ireland was characterised over the Celtic Tiger period by a range of practices which bear important similarities discursively and materially with key processes of neoliberalisation (Peck and Tickell, 2002). As opposed to an ideologically informed project, such as those implemented by Thatcher in the UK and 11

Reagan in the USA during the 1980s (see Harvey, 2007), Irish neoliberalism was produced through a set of short-term (intermittently reformed) deals brokered by the state with various companies, individuals, and representative bodies, which cumulatively restructured Ireland in unsustainable and geographically uneven ways.

Breathnach (2010) argues that the tension between the overwhelming concentration of employment and population in the east of the country and the political, clientelistic motivation towards balanced regional development has resulted in an inability on the part of the state to make spatially selective decisions in order to plan strategically for economic growth. During the Fordist period, in which Ireland operated as a branch-plant manufacturing centre, this resulted in an extreme form of industrial decentralisationmanifested during the 1970s by the states construction of advance factories in 156 locationsbut was signicantly exacerbated from the 1980s onwards, once services became the main source of employment growth. Although intended as a way of addressing this imbalance, the National Spatial Strategy published in 2002 was effectively disabled by these same political features. Moreover, when export-led growth slowed down, the entrenched system of local clientalism was not superseded by indigenous entrepreneurship which capitalised on Irelands new industrial composition but, rather, new wealth was invested in property. The Irish states moves towards neoliberalisation, then, could be seen to operate at two scales: the international level, whereby the state attempted to create a vibrant and open economy which would attract FDI due to the ease of conducting business and generating pro t, and the national/local level whereby the state pandered to political allies by cultivating the conditions for a property boom, which was equally characterised by a lack of spatial selectivity. As the property sector began to take precedence over FDI as the major generator of state revenue, and due to reliance on indirect taxes from this sector, an economic model which could only perform adequately in a situation of perpetual growth was created. This need for perpetual growth was ingrained both structurally, in the states taxation system, and discursively, in the Celtic Tiger myth itself.

The Irish neoliberal model ostensibly takes elements of American neoliberalism (minimal state, privatisation of public services, public private partnerships, developer/speculator led planning, low corporate and individual taxation, light to no regulation, clientelism) and blends them with aspects of European social welfarism (developmental state, social partnership, welfare safetynet, high indirect tax, EU directives and obligations). Rather than being the result 12

of some well-conceived economic master plan, however, the Celtic Tiger was the outcome of a complex set of unfolding, interconnected, often serendipitous, processes held together by a strategy of seeking to attract and service FDI. Thus, Ireland exhibits a peculiar brand of emergent neoliberalisation. The model is perhaps better described as a series of disparate policies, deals, and actions which were rationalised after the fact, rather than constituting a coherent plan per se. As such, the claim that the Irish model sits politically somewhere between Boston and Berlin is not so much an indication of a country pioneering a new model of neoliberalism, as it is suggestive of the ways in which new policies and programmes were folded into the entrenched apparatus of a short-termist political culture shadowed by low-level clientelism, cronyism, and localism which works to the detriment of long-term, statewide planning.

Much of the policy transformations of the Celtic Tiger era movements were, then, to an extent the outcome of a certain political pragmatismdoing what was necessary at the time to satisfy the needs of various sectors of the voting publicrather than being characterised by clearly delineated periods of roll back and roll out neoliberalism. The rolling out of neoliberal mechanisms, such as privatisation and public private partnerships, was rarely handled in any sort of ideologically informed or systematic manner, and the state often failed to achieve the appropriate balance between private sector risk and public sector reward in these projects. Despite the relatively small receipts yielded to the taxpayer by privatisation, the state has continued to roll out privatisation into diverse service areas such as school buses, refuse collection, motor-vehicle testing, and urban car parking and clamping, and to initiate public private partnerships with respect to public buildings, social housing, and road infrastructure. However, while the state rolled out neoliberal policy mechanisms in fragmented and piecemeal ways into different sectors, this was not accompanied by an equivalent rolling back of social welfarismunemployment and child support and other bene ts remained relatively high although it should be noted that (a) the overall quality of services in many areas of the public sector (such as health, education, and public transport) failed to re ect the magnitude of the dramatic transformations of the nations wealth during this same period (b) social disadvantage was not adequately addressed during this period and (c) the response to the current crisis has seen savage cuts in these same sectors. Moreover, rather than pitting the state against the trade unions, the period of Irish neoliberalisation was characterised by the dense networks of institutions of social partnership extending across all spheres of the political economy and integrating local actors, state agencies, and European Union Programmes [that became] an 13

institutional mechanism of public governance through almost all spheres of public life. These agreements traded work-related and pay-related concessions for union docility, and were used by the state as a means of manufacturing labour stability. Additionally, Unlike most other countries in Europe, Ireland has consistently rejected the model of decentralised decision making even in policy areas, which many observers might suggest are most sensibly located and managed by the local or regional sub-national levels of government. Irelands system of local governance is traditionally poorly organised, in receipt of very limited funding, and responsible for a very limited range of policy.

The neoliberalisation of Ireland has been imsy and unsustainable and the Irish state failed to recognise that market liberalisation requires a more robust and socially responsible state to achieve equality and stability. Similarly the Irish state has failed to embed FDI industries adequately over the boom period through investing in and growing indigenous companies. Indeed, Irelands dependence on foreign investment is starkly identiable by the degree to which GDP exceeds GNP.

What we need to take away from this discussion is that these particularities of the Irish states irtations with neoliberalism are not anecdotal or an addendum to the technologies more representative of neoliberalisation globally. Rather, these particularities have been central to how actually existing neoliberalism has emerged in the Irish context. As such, we nd the concept of creative destruction, which sits at the heart of ideas such as path dependency and path trajectory, problematic and offer instead the concept of path amplication. The relentless focus on the paradigmatic case of neoliberalisms assault on and dismantling of Fordist Keynesian, and cultural, political, and historical infrastructures at the level of the city, has arguably effaced the recognition that in some cases neoliberalism actually nds itself in harmony with, rather than in opposition to, prior institutional histories. Path amplication points to the importance of forms of path trajectory in which history serves to amplify rather than slow down neoliberalisms ambitions. Although often seen as a burden, weight, and source of friction, in fact in some cases pasts can serve as catalysts, lubricants, and wellsprings for neoliberal reforms. In light of these arguments, the following section looks more closely at the Irish property boom as indicative of the actually existing ways in which these processes converge. 14

4.0

Financial Crisis and Asset Bubbles

The suddenness and the severity of the economic fall from grace took many by surprises. Irelands banks were the first casualty of the international financial crisis. But the principal explanations for Irelands woes were not to do with the banks exposure to risky investment products: Ireland was relatively untouched by US sub-prime lending.

The main source of the Irish banks problems was their over-exposure to property-based loans and the close personal as well as financial links between bankers, property developers, builders, and politicians, especially in the dominant Fianna Fail party. Between 1997 and 2007,housing prices rose 175 percent in the United States, 180 percent in Spain, 210 percent in Britain and 240 percent in ireland.many commentators had warned that Ireland was in the grip of an asset price bubble-an enormous and clearly unsustainable construction boom and soaring house prices. The international crisis exacerbated but did not cause underlying banking crisis in Ireland.

The contribution to Irelands crisis of ruinously bad lending practises, increasing reliance on short-term international lending and over-reliance on poorly monitored loan collateral, and poor regulation of the banking sector, is by now well established. Ireland experienced a plain vanilla banking crash due to over-reliance on loans to construction in an unsustainable bubble economy. Banking regulation was too light to make any appreciable impression on banks pursuit of profits through increasingly risky lending practices. For a time, this yielded large profits for banks and large bonuses for the bankers: the privatization of gains. The governments bank guarantee, on the other hand, resulted in the nationalization of losses.

A Huge Deficit Opens Up 15

The collapse in construction activity, and the corresponding jump in unemployment, resulted in a large loss in income tax revenues and an increase in social welfare payments but if the fiscal consequences of the housing crash had been limited to these impacts, Ireland would have been positioned to cope well. However, Irelands tax base had been altered during the later periods of the boom to collect more and more tax revenue from construction activity.

Figure 3 shows the share of total tax revenue due to income taxes (the black line on the left scale) and due to asset-based taxes such as stamp duties, capital gains tax and capital acquisition tax. Thanks to booming housing activity and surging house prices, the share of tax revenue due to these asset-based taxesrose steadily during the 1990s and then rapidly during the period after 2002. At the same time, there was a corresponding reduction of a similar magnitude in the amount of revenue collected from income taxation. When construction activity collapsed, this substantial source of government revenue disappeared almost overnight.

Figure 3: Composition of Tax Revenues

By late 2008, the collapse in construction activity was apparent and the world economy was entering a severe recession. Irish real GDP declined by 3.5 percent in 2008 and by 7.6 percentin 2009. Despite having had years of budget surpluses, Ireland was suddenly facing a

16

yawning fiscal gap. Indeed, it was apparent by early 2009 that, without fiscal adjustments, Ireland was heading for deficits of as large as 20 percent of GDP. The scale of these potential deficits meant that, despite the low starting level of debt, the Irish government realised there was no room for discretionary fiscal stimulus to ease the effects of the severe downturn. Instead, from late 2008 onwards, the Irish government has implemented a sequence of contractionary budgets featuring a cumulative total of tax increases and spending cuts worth 20.8 billion. These adjustments are the equivalent of 13 percent of 2010s level of GDP or 4,600 per person and represent the largest budgetary adjustments seen anywhere in the advanced economic world in modern times.

Despite these enormous adjustments, the decline in the size of the Irish economy has been so severenominal GDP has declined by almost 20 percentthat the European Commission are still projecting a budget deficit of 10.6% in 2011.

The Banking Crisis

The tale of the Irish fiscal crisis is gruesome enough if one focuses alone on the collapse of the construction sector and its effects on revenues and expenditures. However, the straw that broke the Irish camels back was the effect on the state finances of the governments attempts to deal with a banking crisis. The acceleration in housing activity after 2002 that is evident in Figure 7 was largely financed by the Irish banks. These banks significantly changed their business model during the later years of the boom. Prior to 2003, the Irish banks had operated in a traditional manner, with loans being roughly equal to deposits. After 2003, these banks increased their property lending at rapid rates and financed much of this expansion with bonds issued to international investors. From less than 15 billion in 2003, international bond borrowings of the six main Irish banks rose to almost 100 billion (well over half of GDP) by 2007. In addition to rapidly expanding their mortgage lending, the Irish banks also built up huge exposures to property developers, many of whom had made fortunes during the boom and were doubling down on property with ever more extravagant investments. Many of these development loans were used for investments that could only have paid off if property prices continued to rise. Leading the way was the now-notorious Anglo Irish Bank, which specialised 17

in property development. Anglo expanded its loan book at over 20 percent per year and is now known to have had a series of serious corporate governance problems.

During 2008, as evidence built up of the scale of the Irish construction collapse, international investors became concerned about the exposure to property investment loans of the Irish banks. These banks found it increasingly difficult to raise funds on bond markets and by late September 2008, two weeks after the collapse of Lehman Brothers, the Irish bankers turned up at government buildings looking for help.

The Irish governments decision on September 30, 2008 to give a near-blanket guarantee for a period of two years to the Irish banks has been, and will continue to be, hotly debated. The government appears to have taken seriously the assurances of the Irish Central Bank that the banks were fundamentally sound and were merely suffering from a short-term liquidity problem. Thus, the government appears to have believed that the guarantee would not have consequences for the state finances. However, there is also evidence that senior civil servants, as well as Merrill Lynch (who had been recruited as advisors in the weeks prior to the decision) warned against the dangers of a blanket guarantee.

By spring of 2009, it became apparent that the losses at the Irish banks were extremely large, most notably at the dreaded Anglo Irish Bank. This paper will not focus on the various strategies the Irish government adopted from that point onwards to deal with the crisis. However, the fact that the liabilities of the banks were guaranteed by the government played a key role in limiting options to restructure insolvent banks in a way that would have seen losses shared with private creditors. Thus, in 2009, the government began using state funds to recapitalise the guaranteed banks.

The Endgame

By 2010, it was clear to international financial markets that in addition to a serious problem with its budget deficit, Ireland was facing a large bill of uncertain size in relation to fixing its 18

banking sector. A National Asset Management Agency (NAMA) was set up to issue government bonds to the banks to purchase distressed property assets at a discount and as 2010 went on and NAMA acquired more properties, it became clear that the final bill for recapitalising the Irish banks would be enormous.

In September 2010, the government provided a final estimate that Anglo Irish Bank would cost the state about 30 billion or almost 7000 per person living in Ireland today. The cost of these losses is being covered by a promissory note which will make cash payments over a number of years but which was fully counted against Irelands general government deficit in 2010, leading to what must be a world record official deficit of 32 percent of GDP.

As the economy failed to show evidence of a strong recovery, international markets also became increasingly concerned with the future losses of the Irish banks due to mortgages and business loans. The banks had been able to issue bonds from late 2008 to early 2010 under the protection of the state guarantee. However, as concern about potential sovereign default began to rise, this guarantee ceased to be of much use. Many of the bonds that had been issued matured in September 2010, when the original guarantee ran out.

When the banks failed to find new sources of market funding to roll maturing bonds or replace the corporate deposits that also began to leave the system at this point, they turned to the ECB for emergency funding. Borrowing from the ECB by the guaranteed banks, which had been negligible prior to the crisis, jumped from 36 billion in April 2010 to 50 billion in August to 74 billion in September. The banks also began to run out of eligible collateral to use to obtain loans from the ECB, at which point the ECB allowed the Central Bank of Ireland to begin making emergency liquidity assistance loans to the Irish banks.

International markets, which had been reasonably confident throughout 2009 that Ireland would make it through without a sovereign default and which generally had a favourable view of the Irish governments fiscal adjustment programme, became increasingly concerned that the Irish banking sector was going to destroy the creditworthiness of the Irish sovereign. Bond yields on sovereign debt rose in September and October and then moved up 19

dramatically in November following the famous Deauville declaration of Mrs. Merkel and Mr. Sarkozy.

5.0

Events

Irelands financial crisis trajectory, July 2008 March 2009 8 July 2008: After the Exchequer reports an expected shortfall in government revenue of 3 billion, the new Taoiseach (and former Finance Minister), Brian Cowen, announces a number of new budgetary measures decided on by the government in response to the emerging financial pressures. The measures trigger their own crisis, with a backlash against proposed cuts to pensioners medical benefits.

1920 September: The Irish Times reports that Minister for Finance, Brian Lenihan, is prepared to review the government system of guaranteeing 90 per cent of deposits up to a limit of 20,000 amid calls for this limit to be raised. The next day, the Irish Government moves to secure the deposits in Irish banks to prevent a run on them. The 20,000 guarantee is increased to 100,000.

25 September: Ireland is officially the first EU member state to slip into recession.

30 September: Finance Minister Lenihan presents the Credit Institutions(Protection) Bill 2008 to the Dil (the Irish national parliament). The bill enables the government to take a stake in any financial institution that receives financial support. It also incorporates an insurance premium of 0.2 per cent of deposits over the two years it is in effect. This could amount to 1 billion in additional revenue to the government in return or a guarantee of more than 400 billion. The institutions being offered the protection of the guarantee are Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life & Permanent, Irish Nationwide Building Society and Educational Building Society. 20

8 October: The CBFSA reduces the interest rate by 50 basis points.

15 October: The budget is brought forward. Cowen outlines the measures to achieve savings, including additional government borrowing, reduction in public services and raising taxes. Cowen also incorporates an agenda of public service reform.

26 November: The Taoiseach announces measures of reform within the public sector.

5 December: The open, export and service-driven economy of Ireland has nosedived, pushing the governments five-year projected deficit up to about 12.5 billion. The Finance Minister, indicating the budget position is worse than expected, announces stimulus borrowings, further review of public sector spending and the establishment of the Special Group on Public Service Numbers and Expenditure Programmes. Much of this is overshadowed by a separate crisis related to an outbreak of foot and mouth disease in Irish swine, which occurred just before the Christmas season when hams were in high demand.

18 December: The Taoiseach announces and releases Building Irelands Smart Economy: A framework for sustainable economic renewal. The announcement and release of the framework appear to be the result of a long process predating the global financial crisis. The framework is, however, absorbed into the governments reaction to the global financial crisis and linked to the future policy direction for development in Ireland.

19 December: Sen FitzPatrick, chairman of the Anglo Irish Bank (AIB), resigns. He had been temporarily transferring 87 million in loans to another institution before the fiscal years end to avoid disclosure of their existence to shareholdersa practice that had been occurring for eight years. The other institution is believed to be the Irish Nationwide Building Society. The chief executive of AIB resigns several hours later. In response, Finance Minister Lenihan announces

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plans to recapitalise AIB and the Bank of Ireland, take effective control of AIB and clear out the remaining board members.

9 January 2009: Patrick Neary, chief executive of the Irish Financial Services Regulatory Authority, resigns after allegations that his staff first learned in January 2008 that FitzPatrick had been transferring loans.

28 January: Cowen, speaking in the Dil, indicates the crisis in Ireland has developed further. A five-year shortfall of 15 billion has been identified. Cowen says measures, further to those already announced, will be necessary. A new policy is also announced: A Pact for Solidarity and Economic Renewal. This is intended to involve social partners (unions, employers) in the solutions and garner political support for future measures.

3 February: The Taoiseach delivers a statement to the Dil detailing the fiscal and budgetary measures to be taken in 2009/10 to rein in borrowing and reduce expenditure. The unions (social partners) do not agree with the plan, but the government intends to go ahead regardless. The measures include cuts to child care, reduction in overseas aid, reduction in public service pay and delays in agreed pay rises . 19 February: Finance Minister Lenihan presents the second stage reading of the Financial Emergency Measures in the Public Interest Bill 2009.

10 March: CBFSA Governor Hurley, who has agreed to stay on in his role post-retirement age, claims in response to questions from the Committee on Economic Regulatory Affairs that the government had ignored his many warnings about the state of the Irish economy.

24 March: The Minister for Finance meets with two government-appointed board members for the Irish Nationwide Building Society (INBS) over recent disclosures in relation to the remuneration of the CEO of INBS, which requires further investigation. 22

23

Between 1980 and 1986, total government expenditure grew from 54 percent to 62 percent of GNP, and public debt increased from 87 percent to 120 percent of GNP while annual budget deficits exceeded 10 percent of GNP. Over one-third of all tax revenue (over 90 percent of income tax revenue) was being used to service this debt. Meanwhile, the economic dependency ratio rose to 2.3 persons per person employed in 1985, and unemployment stood at 15 percent. While the IDA continued to attract foreign investors (IBM, Lotus, Microsoft, and Bausch & Lomb, among many others) into the 1980s, some high-profile failures of recent investments raised questions about this strategy. In particular, a specially commissioned investigation by Telesis on behalf of the National Economic and Social Council (NESC) raised some troubling issues. Telesis found that the value of inward investments tended to be overstated-employment prospects were too often exaggerated at a time of high unemployment-and that promised linkages to the domestic economy were frequently weak. It also criticized what it saw as an excessive attention to overseas companies relative to indigenous businesses. While initially stung, the IDA responded well to the report and increased its attention to Irish-owned industry. The political parties were not successfully addressing the gathering gloom. Fianna Fail, the opposition party since 1982, won the general election in 1987. When in government in the late 1970s, Fianna Fail had been largely responsible for the excessive and misguided public spending. This time, however, the party tried a different path. On election to government in 1987, they surprised many, including their own supporters, with a program of severe cuts in expenditure accompanied by some novel consensus-building and developmental measures. Within a few years, these steps began to show dividends, helped by a coincidence of other factors. In this study, the causes and events happened during the fall of Irelands Celtic Tiger will be explained further.

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Part B: Issues for Discussion

1.0

Celtic Tiger Economy Booster

1. Tax Policy The tax policy of Ireland was one of the factor that boosted Celtic Tiger economy. In 1988, the first tax amnesty established. This helped reducing significantly the budget deficit and the PSBR. While the tax regime was positive for attracting foreign direct investment, indirect taxes, which were also dubbed stealth taxes, as a proportion of total taxes, were the highest among the industrialised countries. Electricity costs for consumers, are 46% above the average paid in the UK and the cost of a new car is 28% above the EU average. The Government collects an average of over 30% of the cost of every housing unit built in the State, in taxes and levies. As the standard of the public health service is currently low, the majority of the workforce have to take out private health insurance. The premiums of the State health insurer VHI Healthcare, are expected to have risen more than 50% in the period 2001-2006, by the end of this year. Annual premiums for a typical household are at least 2,000 and the cost of visiting a doctor has risen by about 60% since 2002. A survey that was published by Europe's top bank UBS, shows that Dublin is the 8th most expensive of 71 global cities. A meal for two in a mid price-range restaurant, would cost at least 60, compared with about 40 off the Potsdamerplatz in central Berlin, which gets a 26th place ranking in the survey. While tax policy can be viewed as positive from a macroeconomic viewpoint, as the spoils of the Celtic Tiger have been disproportionately spread, some who have gained from having a job, are nevertheless struggling. Due to the extension of property related tax incentives during the boom, many wealthy earners were able to reduce their income tax to zero and in 2001, one beneficiary of a tax exemption scheme that was originally introduced for poor artists in the 1960's, earned 10 million. More than 11 song writers or other writers earned more than 1 million tax free in 2002. In the December 2005 Budget, a ceiling of 250,000 was put on the benefit and last week, it was reported that Irish rock star and his colleagues in U2 have moved their business

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operations to the Netherlands to avoid paying tax on the income arising from creative work, that they would have paid for the first time. A low tax economy? The report Prices and Earnings that was published by Europe's biggest bank UBS on August 9th, says that Ireland is the 8th most expensive of a sample of 71 cities worldwide. With the highest net wages, Zurich and Geneva, followed by Dublin, Los Angeles and Luxembourg, lead the pack in purchasing power. However, in Dublin, rents are low but house prices are very high. So net earnings after housing costs can vary widely depending on whether the worker is a renter or mortgage payer. In contrast with other European cities, where public health care standards are high, many Dublin workers have to buy private medical insurance from their net earnings after tax. There are other examples of hidden taxes such as the data from the EU last month that electricity prices for consumers from the State-owned monopoly, are 46% higher than in the UK. The Irish Government gets an average of 100,000 in various taxes and levies i.e. tax, from the cost of every housing unit built in the State. It amounts to more than 30% of the average cost and is the Mother of all Stealth Taxes. In November 2004, the Minister for Finance Brian Cowen, said in the Dail that the percentage was 28%. The Construction Industry Federation says that its more than 30%.

2. European Structural and Cohecion Funds Beyond designer humanitarians, separating out the costs of 38,000 additional workers on the public payroll since 2001, public service salaries have increased by 38%. The comparable rise in the average industrial wage was 19%. Salaries of members of the Oireachtas (Irish Parliament) have risen by 100% since 1997 and the base salary (excluding unvouchered expenses) of a member of Dil ireann is 96,650, more than three times that average industrial wage for a male worker. In addition, 900,000 workers in the private sector, have no occupational pension. A member of Dil ireann is entitled to a pension for life of half annual salary, after 20 years service.

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The planned IPO (Initial Public Offering) of Irish State airline Aer Lingus, starkly illustrates the gulf between the Irish public sector and the private professional services sector on one side and the private traded goods sector, on the other. At the urging of the Government, Aer Lingus has conceded all major demands and the workforce will not have their current 14.9 per cent stake in the airline diluted. See: SIPTU celebrates Aer Lingus agreement to privatisation inducements. Average earnings are the highest in the State-owned electricity supplier ESB. The impact of the construction sector is evident in every other sector of the economy. Property related taxes and levies may amount to 9 billion this year - almost 19% of total Government spending in 2006. We are building a record number of new housing units and approximately 1 in 8 people (12.6%) are employed in Ireland, in work in construction. This compares with an EU average of less than 8%. New house building units increased by 23.6% in the seven months to July 2006 and the Central Bank announced that 80% of the 27.3% growth in Private Sector Credit in the year to June 2006, was property related. Of the 258,000 net increase in total persons at work between 2000 and 2005, over 76,000 (or 30%) were in the construction sector. The new housing units are small and are among the lowest standard in the Developed World. We are 4% urbanised but we're short of land! The Irish Central Bank says that the proportion of household borrowing in June 2006 that is secured on housing in the the euro-area countries was highest in the Netherlands at 89.5 per cent, followed by Ireland at 80.2 per cent. The Bank says that while both these countries have high personal debt to income ratios, they also have the highest proportion of household debt secured on housing. Both countries are well above the euro-area ratio of 70.3 per cent. Property has made some Irish people very wealthy and Bank of Ireland Private Banking says that the Irish invested 30 billion (equity and borrowings) in local and overseas commercial property in the period 2001-2005. Ireland has overtaken the United States as the single largest cross-border investor into UK commercial property, accounting for almost 22% of total overseas purchases in 2005. 27

In an extensive research report published last month, Bank of Ireland Private Banking shows that, in a survey of the top 8 leading OECD nations, Ireland is ranked the second wealthiest, behind Japan and ahead of the UK, US, Italy, France, Germany and Canada, showing an average wealth per head of nearly 150,000. In contrast, private rent support has cost the Government 1.6 billion since 2000. At the end of 2000, there were 42,700 recipients. This had increased to 60,100 at the end of 2003 and then settled at the higher level. Last week, the Department of Social and Family Affairs said that a record 79,000 people had requested assistance with the costs of sending their children back to school. National house prices have increased by 270% over the past ten years compared to a total rise of just 30% in the consumer price index. The Sunday Business Post wrote in November 2000 that former Taoiseach (Prime Minister) Albert Reynolds' "home at 18 Ailesbury Road is now worth over 4.5 million. It is believed that he originally paid around 650,000 (825,000) for the house," in the mid-1990s. Last month, The Sunday Independent reported that "estate agent Pat Gunne has emerged as the mystery buyer of number 17 Ailesbury Road, Dublin 4, paying a stunning 13m for the luxury house. The house, previously the property of Delphine Kelly, widow of former Fine Gael minister John Kelly, was sold quietly before the auction." `There is no tax payable by the vendor on the proceeds of a principal residence, whatever the value while Pat Gunne will pay 1.17 million in stamp duty. Farmers who rely on payments from the EU's Common Agricultural Policy and who have been able to sell land for development whether for house or road building, have raked in money from a crazy system that creates both a bonanza and fuels corruption.

3. Trade within the European Union Brian Maccaba, founder of FX technology company Cognotec, told that the company will have revenues of $100 million before contemplating an IPO. Maccaba welcomed the Government's July announcement that the State will invest up to 3.8 billion in R&D in the period to 2013.

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"We've been unable to produce scalable tech companies because of the lack of depth in scientific research. A comparable country like Israel, has over 70 companies on Nadsaq," he said. Table 1: The revenue and profit of top Irish-owned tech companies Company Iona Trintech Datalex Norkom Fineos Cognotec 2005 Revenue $66.8m $48.6m $28.5m 18.1m 21.5m $28.1m Profit -$0.8m -$3.0m $0.6m 3.3m 1.9m $3.7m

It will likely take Ireland up to 20 years rather than 7 to achieve the level of Israel in relation to the development of home-grown knowledge intensive firms. On Tuesday, July 25th, Hewlett-Packard announced its agreement to acquire Israeli software company Mercury Interactive, which has annual revenues of $800 million and was founded in 1989. Foreign firms were responsible for 87.6% of Irish exports in 2004 and it is expected that the current level of Foreign Direct Investment in the Irish economy will fall over the next two decades. Chipmaker Intel and top PC maker Dell, are Ireland's biggest manufacturing employers.

4. Industrial policies The over-reliance on construction is now a key driver in the fact that unemployment is over 400,000 (10.3%) and heading for half a million. Down from a peak of almost 90,000 new housing units in 2005, only about 20,000 will be built in Ireland in 2009. This has added at least 100,000 people directly onto the dole queues.

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The problem, however, was that many of these newly unemployed have a poor stock of education and training. In 2005, the National Economic and Social Council (NESC) showed that 50% of the Irish working population did not have a third level qualification and 25% did not complete the Leaving Certificate. Tens of thousands now unemployed after the end of the construction boom have neither a trade nor a Leaving Certificate that would allow them to progress to third level automatically. The biggest issue was the nature of the training system. There simply arent enough training courses of sufficient duration and intensiveness to quickly retrain large numbers of people in Ireland. In addition, worker compensation for retraining was only the equivalent of the dole, and for many there was an almost inevitable descent into long-term unemployment and work in the black economy. The introduction by the government of a one per cent income levy on incomes of over 15,500 in the budget of April 2009 was added to the problem. In the budget, 25,000 new training places were introduced, most of which were of less than six weeks duration. This will be very ineffective. A sea change in government thinking on active retraining is needed. They must encourage workers, particularly men, to retrain. The current FS retraining allowance of 204 is not a sufficient incentive to most. Many who are discouraged in this way will join the black economy. This now stands at 8%, but could rise dramatically without retraining incentives. This will deprive the government of valuable tax revenue and further worsen the public finances.. This would be intensive retraining, which would result in employment and would be particularly favourable to career changes for those who already have a high level of technical competence. The government would do well the take on board the ICTU proposal on flexicurity. This is a system which operates in Denmark in particular, and in Germany to a lesser extent. In return for labour market flexibility in terms of being prepared to retrain, move jobs, and to some extent have less job security, workers are intensively retrained after becoming unemployed. This is done by giving what would be by Irish standards a generous retraining allowance. Newly trained workers could fill the many areas where there is still growth and labourmarket demand. However, by directly financing new indigenous businesses, which would be suitably assessed for viability, the government can create sustainable and growing employment in areas such as information and communications technology; high standard food ingredients; biomedical device manufacturing; internationally traded health services; and more. The 30

sustainability would be provided by setting up globally competitive Irish companies in these areas. At the time of writing, President Obama is in the process of altering tax incentives that American companies receive to locate in Ireland, precisely for the same reason: to keep investment at home. In addition, jobs can be created in badly needed areas of public infrastructure: hundreds of schools and childcare facilities should be built; affordable housing should also be built, as 53,000 are still on housing waiting lists; affordable childcare facilities should be built and staffed; there is a shortage of health and social care workers due to the embargo, which should be rescinded; and there are many other areas earmarked under the National Development Plan where matched state investment in capital spending and newly trained personnel would prove an excellent investment. Already, the American economy is showing, according to President Obama, fresh shoots of growth in response to the huge economic stimulus package that was introduced in the US in the past nine months and an expansion of the money supply there. All these options would inject a strong short-term stimulus into the economy, which would increase government tax receipts and contribute to growth and employment creation. Just as important, using this period to train and retrain personnel to fill areas of labour and skills shortages can eliminate structural unemployment and put the economy in good shape for an economic upturn. Newly trained personnel in key areas of skills shortage would also be valuable in attracting investment internationally and domestically in these areas. This does work in practice: Denmark, which had an unemployment rate of 12.5% in 1994, used this type of strategy to cut unemployment to 5% over ten years. The Danish system provides an efficient and effective system to allow the economy respond to economic shocks, skills shortages, and unemployment. This gives them the benefit of not over-relying on any single major area of the economy to create jobs.

5. Geography and Demographics With the Exchequer awash with cash from the property boom and windfalls from past tax dodging, the most palatable option for politicians in power, is to sail with the wind. Ryanair, Ireland's most successful company of the past decade, has benefited from EU airline

31

deregulation and there would have been no serious competition for the State airline Aer Lingus if deregulation had depended on the decisions of an Irish Government. Taxi deregulation was introduced following a High Court decision but wealthy vested interests remain untouched. The Government provided taxi drivers with average compensation of 11,500 provided that they had "suffered extreme personal financial hardship and loss of income." It is in marked contrast to payments to beet farmers for up to seven years even though they have ceased growing beet on some of the best land in Ireland. The Progressive Democrats (PDs) has been the junior party in the Irish Government since 1997 and a decade ago, there was optimism that it would be more serious about reform but although small, it has morphed into a version of Ireland's two main parties Fianna Fil and Fine Gael where there is little appetite for challenging vested interests. Twenty years after the introduction of the Internal Market in the European Union, the Irish pharmacists' trade body wishes to maintain the legal prohibition on foreign qualified pharmacists practising in Ireland. Pharmacists dispense drugs on the basis of prescriptions written by doctors; sell non-prescription drugs and cosmetics. Even where, a pharmacist is in a rare position of providing advice to a member of the public, they issue prescriptions every day that have been written by foreign-trained doctors. The Chairman of the PDs Senator John Minihane is a pharmacist and Minister of State Tim O'Malley is also a pharmacist.

Chart 1: Price difference between Ireland and EU15, per cent

(Source: OECD Economic Survey of Ireland 2006: Boosting growth through greater competition)

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With a reformed land development system, a Government with vision could have already built a second Dublin Airport between Dublin and Portlaoise and centralised all Government Departments on the western rim of the city as an alternative to the December 2003 back-of-the-envelope shambolic decentralisation project. In 2005, the two Government parties only finally decided to build a second terminal at Dublin's only airport, that has experienced a huge growth in traffic in the past decade. They spent years arguing about whether the second terminal should be run by the existing State airports management company or a private operation. A sod has not yet been turned and Ryanair's additional routes announced on August 9th, will result in at least an extra 900,000 people passing through the already congested airport. More than 18.4 million passengers travelled through the airport last year and the numbers next year are expected to exceed 24 million. It will be 2010 or 2011 before the chaos at peak hours abates. As the politicians argued, a temporary long wood extension was added to Pier A at the airport. The new second terminal will cost at least 395 million - 46% above the April 2005 cost forecast!! Last March, a low-cost airline terminal that can handle 10 million passengers annually, opened at Kuala Lumpur's impressive modern airport. It took less than a year to build at a cost of 27 million. In the Budget speech of December 2003, the then Minister for Finance Charlie McCreevy announced that a programme of decentralisation of public services "will involve the relocation of 10,300 civil and public service jobs to 53 centres in 25 counties." It was a rabbit-out-of-a-hat announcement and the biggest planning aspect to it before the announcement was the division of the jobs to ministers' constituencies. With the local elections months away, it was perceived to be a master stroke that political opponents couldn't oppose. This biggest "reform" plan in what will be ten years of governing in 2007, was given to PD minister Tom Parlon to implement. In a clear sign in 2002 that a return to government was more important than principle, the PDs had recruited the former leader of the Irish Farmers' Association as a candidate for the Dil, in return for a promise that he would be made a Junior Minister if elected. Parlon was the most militant and sucessful trade/professional group leader at the time and months before had forced the Government to concede significantly improved terms for farmers forced to sell land for roadbuilding.

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In 2001, the Irish State agency, the National Roads Authority (NRA), said in relation to a campaign for an increase in compensation for land acquired by Compulsory Purchase Order, that was led by Tom Parlon, then President of the Irish Farmers Association (IFA) that pronouncements by senior IFA officials, including Parlon, had claimed that:

the State, through the actions of local authorities, has no right to appropriate farmland; the compulsory acquisition of farmland for the national roads building programme is unjust, inequitable and seriously damages the livelihood and viability of 8,000 farm families;

CPO legislation is outdated and compensation paid to farmers is inadequate; compensation should be paid at development land prices given the intended use of land for road schemes and not at market value for agriculture land

Parlon as a Minister of State has said that any tampering with the existing system of determining land prices for development, would be a form of Stalinism. It surely is a bizarre system of "free enterprise" that the PDs claim to support, where public funds paid primarily by German and Dutch taxpayers, provide Parlon and his farmer colleagues with most of their income and when they sell land, the average Irish taxpayer is also screwed.

2.0

Impact of Economy Growth

Over the last two decades, Ireland achieved a remarkable economic transformation from being one of the poorest to one of the richest Member States in the EU when measured by per capita income. It now faces a period of considerable economic uncertainty in common with many other European countries. During the early 1980s, Ireland was an economy in trouble, weighed down by slow growth, high inflation and unemployment, and increasing public debt. Ireland was an economic laggard, underperforming most other EU Member States. During the prolonged sluggish growth period from 1980 to 1986, real GDP1 growth averaged only about 2.3% per year; total government expenditure was well in excess of 50% of GDP; annual budget deficits exceeded 10% of GDP in some years; and public debt increased to 113% of GDP by 1987. In addition, falling living standards and employment led to a high emigration rate. In net terms, 200 000 people left the country between 1981 and 1990.

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The economic and public sector reforms set in train in the late 1980s assisted by EU Structural Funds provided the basis for the turnaround that made the country the fastest growing economy in the EU during the 1990s. What is more, Irelands economy outperformed Greece, Spain and Portugal, three other beneficiaries of the EUs Cohesion Fund. During the Celtic Tiger period (1994-2000), Irish income per head reached and eventually exceeded EU15 levels. Today, Ireland has the second highest level of income per head in the 27-Member State EU, behind Luxembourg.

The Celtic Tiger is born According to those attending a recent seminar on Ireland, part of ECFINs regular series on the economies of Member States, the countrys massive catch-up benefited from a wide array of factors that left it poised to take advantage of the take-off of the global economy during the 1990s. Ireland exhibited a number of classic ingredients for success including an outward orientation and well-functioning markets. The catch-up phase was marked by a sharp increase in investment especially foreign direct investment. A rapid growth in employment was fed by large labour inflows and higher participation rates. A period of sustained growth in productivity reflected greater investment in education and major structural changes within the economy. From 1986 to 1996, these factors helped boost Irelands real GDP to an average growth rate of 5.1% a year, compared to an OECD average of 2.4%. Total employment, which fell by an average of 0.8% per year between 1980 and 1986, rebounded over the next decade by growing at 2.1% per year, compared to an OECD average of 1% and the EU average of 0.3%. The growth in employment practically wiped out unemployment, while also absorbing an increase in the labor supply through an influx of immigrants attracted by the Irish economic boom. Irelands public finances were also transformed. The general government deficit as a percentage of GDP declined from 8.5% in 1987 to close to zero by 1996, with the result that the debt-to-GDP ratio fell to 72%. 35

Consensus on the need for a turnaround in Irelands economic fortunes was embodied in a series of social partnership agreements from 1987 onwards between employers, trade unions, farming interests and government. The partnership structures established by successive governments created a forum for centralized wage bargaining that helped break the spiral of inflationary wage increases and ensured industrial peace.

Transformation to an export-oriented economy The period was marked by a huge inflow of foreign direct investment (FDI), during which Ireland transformed itself into an export-oriented economy with a thriving manufacturing sector and, more recently, a growing service sector. Foreign companies, especially those based in the US, chose Ireland as their entry point into the EU and other European markets. The companies were attracted by Irelands proximity to a large European home market, a young, welleducated, English-speaking labor force, and a low corporate tax rate. In 1996, foreign firms accounted for 47% of the workforce employed in manufacturing and internationally traded services such as information and communications technologies (ICT), chemicals, pharmaceuticals, medical technologies and engineering.

Changing structure of the economy, gross value added by sectors at current prices

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Chart 2 :The chart shows the increased importance of construction and services, and the diminishing significance of agriculture and industry.Source: European Commission

In this context, companies such as Wyeth, GlaxoSmithKline, Pfizer, Merck Sharpe & Dohm, and others have turned Ireland into an export economy serving global markets. The decision in 1987 to establish an International Financial Services Centre in Dublin attracted major outside investment in such segments as banking, asset financing, fund management, and specialized insurance operations and also boosted service exports. After the high-growth period of the 1990s, when real GDP growth reached 11.3% in 1997 and 9.4% in 2000, Irelands economy settled down into a more steady growth phase of between 4 7% over the following years until 2007.During this period, Irelands services exports continued to grow rapidly, accounting for one-third of total exports, with exports of goods and services currently worth about 80% of the countrys GDP.

Rebalancing of the economy under way But the nature of the Celtic Tiger changed somewhat in the new millennium, as the main engine of economic growth switched to the domestic construction sector and consumer spending. Demand for housing rose along with income levels. However, by 2006 the construction market began to fall back from its previously unsustainable high levels and a significant rebalancing of the economy is now under way. The effects of the shrinking construction sector and lacklustre productivity growth are taking their toll. While real GDP growth was 6% in 2007, the latest government forecasts suggest it will moderate in 2008 to about 0.5%, a rate not experienced since the late 1980s. This estimate primarily reflects lower housing construction, but also takes into account slowing consumer spending, investment and exports. While the short-term outlook is disappointing, many economists have pointed to the underlying healthy position of the economy over the medium term. To capitalize on this 37

position, Ireland must now re-examine the factors that will make it a more competitive place to do business. For example, through more and better infrastructure, further labor market reforms (especially within the public sector), and a rebalancing of the tax structure to counter falling government revenues.

Focus on improving productivity Over the longer term, the loss of wage competitiveness in recent years has meant that Ireland must improve productivity. Productivity growth was the most important factor behind the stronger increase in GDP per capita over 1980-2000, Irish economist John FitzGerald said at the DG ECFIN seminar. Demographic factors and higher female participation in the workforce also played a role, he added. Marco Buti, DG ECFINs Acting Director-General, noted that despite the unique features that helped Ireland achieve high growth during the 1990s, some lessons could still apply to other economies. Irelands economic transformation showed that the key ingredients for success are good institutional and structural policies, coupled with an appropriate fiscal policy. Sticking to a sound macroeconomic policy mix and implementing a reform agenda would help ensure that Irelands economic transformation is sustained in the years ahead.

3.0

The Banks and the Property Bubble

Northern Ireland was the perfect place for this week's G8 summit. These meetings are supposed to promote peace and prosperity, and Northern Ireland, since the Good Friday Accords of 1998, has been a textbook case of how the two go hand-in-hand. Despite two global recessions, its post-Troubles economy has enjoyed resurgent investment, immigration, and tourism. If peace can develop into true harmony, growth should accelerate, as the 99 "peace walls" separating Catholic and Protestant neighborhoods in Belfast come down and resources in Northern Ireland can flow freely to their best use. In keeping with the spirit of the summit, British PM David Cameron dangled the prospect of financial assistance to Northern Ireland as its tears down those walls. Just 12 miles from the site of the summit, the Republic of Ireland offers economic lessons to Northern 38

Ireland, as well as the rest of the world, both in what to do and in what not to do. Northern Ireland, for all its progress, remains a relative backwater in the United Kingdom, ranking tenth among the UK's twelve territorial units in per capita income. Its sibling to the south, by contrast, is one of the richest nations in Europe, richer than the UK or any of the European G8 powers. And practically no other country rose higher during the boom of the 2000s or fell farther in the worldwide financial crisis. Ireland had a double-dip crisis, following the worldwide crisis of 2008 with one of its own, marked by costly bank bailouts, a sovereign debt crisis, and an unemployment rate that still is over 13%. Ireland did many things right in the past three decades. One does not have to be a Thatcherite to acknowledge the success of Ireland's market liberalization in the 1980s and 1990s: opening up to foreign imports, investment, and immigration; reducing its chronically high government budget deficits; and reducing its confiscatory top tax rates on personal and corporate income. In the last case, Ireland went so far as to become a tax haven, with a corporate tax rate of 12.5%, barely half of Britain's and less than a third of America's.

Although America's effective corporate tax rate, net of all loopholes, is not much higher than Ireland's by some measures, the high statutory rate, together with the complexity of the tax code, put America at a disadvantage. Numerous American companies, from Apple to PepsiCo, have moved operations to Ireland. Economists on both the left and right tend to favor lowering the corporate tax rate while closing loopholes in the interest of efficiency and horizontal equity (why should some corporations pay full fare while others pay nothing?). Tax avoidance was a big issue at the G8 summit; countries like the US and UK could do much to preempt tax avoidance by cutting corporate tax rates. Ireland's immigration policies have also been remarkable. For a country with an exceptionally homogeneous population and a long history of net emigration, Ireland reacted adroitly to the hordes of outside job seekers that its boom attracted. Beginning in 1996, more people came to Ireland than left. The country opened its borders to workers from EU countries and was liberal in its acceptance of non-EU work applicants, especially skilled workers. Study after study finds that skilled immigrants benefit their new economy, yet many countries, including the US and UK, make it overly difficult for skilled workers to enter.

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Ireland's new workers were easily absorbed, as unemployment fell to levels that seemed unimaginable a decade earlier. The labor market was one of the most flexible in the world, and employers praised the productive labor force of well-educated Irish and skilled immigrants. Even today, a 2013 World Economic Forum survey finds that the Irish are among the most welcoming people in the world to foreign visitors. Today, however, Ireland's labor market is among the weakest. The unemployment rate is 13.5%, compared with 7.6% in the US, 7.8% in the UK, and 8.1% in Northern Ireland. While this is not much higher than the 12.2% jobless rate for the euro-using nations as a whole, it is still alarmingly high and would be much higher still if not for a mass exodus of foreign workers. Arguably, Ireland's mass unemployment is a greater calamity than the country's recent sovereign debt crisis and ECB bailout. What is at the root of it? The short answer is that the collapse of the housing bubble turned Ireland's economy into a crater. Real GDP has not only failed to recover its 2007 peak, but it is also still short of its level in the crash year of 2008. Ireland's housing bubble was in a class by itself: it lasted twelve years, twice as long as the US bubble, and real property prices tripled, a feat unmatched by any other modern economy. When housing prices began to fall in 2007, property investment and other business investment plummeted. House prices kept on falling and may not have bottomed out yet. Irish households had borrowed to the hilt during the boom, and drastically cut back their spending when bad times hit. (The household debt to income ratio in Ireland is currently 200%, higher than in Greece, Italy, or Portugal.) Ireland's banks were deeper in property loans than their US counterparts, so insolvency ran deeper, credit was tighter, and the bailout was costlier. The big bailout came two years after the crash, in 2010, and caused such an explosion of the deficit and debt as to precipitate a sovereign debt crisis. The lesson here seems to be the usual one: manias happen, and they are hard to stop for several reasons. First, they can be hard to spot, as they are usually preceded by and even coincide with excellent economic performance based on fundamentals, such as high productivity growth and surging exports. Second, the prosperity they bring at the time often benefits a lot of people, who want to believe it's real. Third, politicians and their appointees want to ride this wave of prosperity as much as anyone else does. If a bubble can be tamped down, it requires tremendous courage and influence on the part of politicians and policymakers.

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Finally, Ireland has a lesson about fiscal austerity: It's great during a boom, bad during a slump. Ireland in the mid-2000s was the rare country that followed the second part of John Maynard Keynes's fiscal prescription: run deficits during depressions, surpluses during booms. (Many countries choose instead to run deficits every year.) Ireland's government produced balanced budgets in the early 2000s and growing surpluses in the mid-2000s, and its debt-toGDP ratio shrunk to an enviable 20%. But when the crash hit, the government actually reduced its spending, by about 20% from 2008 to 2013. So the Irish got the other part of Keynes's dictum wrong. This severe fiscal contraction undoubtedly exacerbated an already-dismal economic situation. The deficit rose anyway, on account of reduced revenues and the bank bailout, and the debt/GDP ratio soared well above 110%. Even that might not have prompted a sovereign debt crisis but for investors' fears over the Greek debt crisis and the looming crises in Portugal, Italy, and Spain. Ireland's debt would still be manageable if not for the massive bank bailout, which again raises the point that unchecked manias are dangerous. (Granted, the bank bailout did not have to happen - economists as opposite as Paul Krugman and the Cato Institute's Alan Reynolds say it was a mistake, and Iceland said no to its banks in a similar situation - but bailouts are the usual rule in these situations.) Ireland's economy has too much going for it to stay depressed indefinitely, and as one of the world's most open economies, its foreign investment and exports are sure to pick up when the world economy rebounds. When it does, I hope policymakers will find a way to keep on lid on the next Irish bubble.

4.0

The Failure of Financial Regulation

The Financial Regulator is officially the Irish Financial Services Regulatory Authority, was the single regulator of all financial institutions in Ireland from May 2003 until October 2010 and was a "constituent part" of the Central Bank of Ireland. It was re-unified with the Central Bank of Ireland on 1 October 2010 and its board structure was replaced by a new Central Bank of Ireland Commission. 41

The regulator was established on 1 May 2003 by the Central Bank and Financial Services Authority of Ireland Act, 2003. The regulator is a distinct element of the Central Bank and Financial Services Authority of Ireland with clearly defined regulatory responsibilities which cover all Irish financial institutions, including those previously regulated by the Central Bank of Ireland, the Department of Enterprise, Trade and Employment, the Office of the Director of Consumer Affairs and the Registrar of Friendly Societies. The regulator has a strong role in consumer protection and took over the policing of the Irish Stock Exchange on 1 November 2007, assuming day-to-day responsibility for detecting and investigating market abuse.

Following the failure of existing regulatory structures to prevent excessive lending to the property sector, consultants Mazars, which were brought in to review operations said that "regulatory expertise was lacking in some areas. Responding to the highlighted weakness, Brian Lenihan, the Minister for Finance, said "substantial additional staff with the skills, experience and market-based expertise will be appointed. Those recruited will also have the expertise to regulate the international financial services sector.He also announced that all consumer functions will be '"re-assigned"' to other agencies.

In June 2009 the government announced that a new body, called the Central Bank of Ireland Commission, will replace the current board structure of the Central Bank and the Regulator. A July 2009 editorial, in the respected Sunday Business Post, said "returning the key powers of regulation to the Central Bank will be useless unless there is a fundamental change in the culture of the organisation. This does not require a complete change of personnel, but a change of key personnel. The Irish Times, a national "newspaper of record" opined that "the Financial Regulator has a death wish and its regulatory edict verges on the Pythonesque, eating into what is left of its credibility. Staff, who work 32.5 hours per week or 6.5 hours a day, went on strike in November 2009.

The Financial Regulator was warned by the German regulator, BaFin, as early as 2004 that Sachsen LB's troubled Irish subsidiaries were involved in highly risky and under-scrutinised transactions worth as much as 30bn or 20 times the parent bank's capitalisation. Despite the warning, in 2007 the Regulator approved another Sachsen investment vehicle and two months 42

later the stable of off-balance sheet companies needed a 17.3bn bail-out from the German association of savings banks to keep Sachsen afloat. The Irish Brokers Association said there was "intense frustration and annoyance" about excessive red tape and the Financial Regulator (FR) refusing to listen to them in 2005.

The same year the Regulator was criticised for publishing a report, which it was said, read a bit like a promotional brochure for the money lending industry. It included a section devoted to arguing why moneylenders should be allowed to charge as much as they do. (188%-plus collection fees of up to 11%.) The New York Times referred to Ireland as the Wild West of European finance in April 2005 which was seen to underline the fragility of the Country's Financial Regulation system.

The Australian Authorities warned the Financial Regulator of the activities of person connected with the largest bankruptcy in that country's history. The FR did nothing, he went on to commit a US$500 million fraud and pleaded guilty in the US despite the crime being committed in Ireland.

Their consumer panel stated that the regulator was slow to respond to consumer issues and '"appears to seek complexity and obstacles rather than to seek consumer-oriented solutions to current and emerging problems"'. And it warned that this approach can undermine consumer confidence in the "efficacy of the regulatory process. The same month in 2006, a governmentappointed panel that consists of banking and insurance representatives revealed widespread dissatisfaction with the regulators skills base. The regulators industry panel, which provides the regulator with feedback on its charges and policies said the levy on financial institutions for industry funding is perceived by industry as cumbersome and bureaucratic and had major concerns with the quality and cost of the services provided to the regulator by the Central Bank. They did not give their consumer panel a copy of the report of the working group set up following the collapse of a stockbrokers, where some investors were waiting over 7 years to have their claims processed. When the panel managed to get sight of it, they said it was "extremely deficient".

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In July 2007, the Comptroller and Auditor General called for an independent review of the inspection process for financial institutions carried out by the Financial Regulator.The Comptroller urged the introduction of clearly defined risk categories for individual areas of financial services, so that the appropriate level of supervision required for each institution can be implemented in line with the risk involved.

The Financial Regulator knew that Allied Irish Banks were overcharging consumers in FX fees but failed to act for a number of years. They gave a parliamentary inquiry the "false impression" that they were unaware of it. The whistleblower who gave the FR the information was requested to come to a meeting with them but was only invited to withdraw the allegations of wrongdoing and at the same time found himself removed from his position at Allied Irish Banks without any reason given. After his case was highlighted in the media, the FR officially apologised on how the authorities treated him, eight years after alerting them of overcharging.

The Financial Services Consultative Consumer Panel, which is tasked with monitoring the performance of the Financial Regulator, said that most consumers have lost significant amounts of money due to the inadequacies of the financial regulatory structure. It also criticised the deficient response of the regulator to threats to consumers, including the Irish property bubble. In response they said It is clear that the actions we took were insufficient and were not taken early enough,.

The Fine Gael leader Enda Kenny and finance spokesman Richard Bruton called for the board and senior management of the Financial Regulator to be sacked. Independent Senator, Shane Ross said that the FR was an institution that had lost the faith of the international markets They think it is actually genetically flawed. That is the problem were going to have to attack next.

Ernst & Young was hired, to advise the Financial Regulator on the 440 billion bank guarantee scheme in January 2009, despite the fact that Ernst & Young was being investigated arising from its audits of Anglo Irish Bank and had also refused to appear before a parliamentary committee following the collapse of the same bank after receiving "legal advice". In July 2009, they blocked insurers and banks from making any critical statements containing 44

"any references to the Financial Regulator" by means either of "public press statements" or unapproved public references, whether "written or oral."

Two reports of an investigation into the "wholly inappropriate sale of perceptual bonds" by Davy Stockbrokers to credit unions failed to involve any of the credit unions affected, leaving them "in the dark and powerless to add any value to the findings of this investigation. The FR then declined to give them access to the reports. The Chairman of one the Credit Unions who suffered large losses told his members The failure to publish the reports is to place the complaints process in a shroud of secrecy. Such a failure of openness, transparency and fairness can only serve to undermine confidence in the complaints process, forcing those with grievances into the courts. Such a course of action is not in the interest of any of the stakeholders.

The next month, the head of the German Financial Regulator told the Bundestag Finance Committee that the failure of the "terrible" Depfa Bank, which was completely supervised by the Irish Financial Regulator, lead to the collapse of its German parent which forced Berlin to bail it out at a cost of 102 billion. The committee was told that the alternative was a run on German banks and the eventual collapse of the European finance system and You would have woken up on Monday morning in the film Apocalypse Now. Transparency International have questioned whether the Financial Regulator should continue to have an exemption from Freedom of Information legislation. Compliance experts have said "The most offensive confidentiality provision in Ireland is the one which protects the Financial Regulator". Both the Financial Services Ombudsman and Information Commissioner are among others, who called for a lifting of the confidentiality applied by the regulator to much of its work. Other EU regulators have a policy of transparency.

Former Taoiseach Bertie Ahern, in a report in the Financial Times said that his decision in 2001 to create a new financial regulator was one of the main reasons for the collapse of the Irish banking sector and if I had a chance again I wouldnt do it. "The banks were irresponsible," he admitted "But the Central Bank and the Financial Regulator seemed happy. They were never into us saying even listen, we must put legislation and control on the banks'.

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The director general of the Free Legal Advice Centres in October 2009 said, the code of conduct on mortgage arrears produced by the Financial Regulator was "deeply disappointing", and did not offer enough protection for consumers. In a speech, the Governor of the Central Bank said that "ignorance and inattention" by FR staff were to blame for regulatory failure.

The Consumer Consultative Panel, in December 2009 said that they were unable to function for almost a year because officials ignored requests for meetings and "we believe it is unacceptable that the board of the Financial Regulator has failed to take responsibility for their stewardship of the organisation during the last six years. The FR did not understand many of the sectors and financial products it regulates. These failings undermine their ability to enhance or enforce corporate governance in the wider financial services sector. It also warned "that the reforms announced to date were not sufficient to avert more crisis' in the future.

High risk and sloppy lending practices at the Irish Nationwide Building Society were reported to the Financial Regulator by external accountants over a long period but did not change its behaviour. The former head of compliance became a whistle blower by reporting "dodgy practices" but again the authorities did nothing. It required a 5.4 billion Government bailout, leaving it effectively in State ownership. A letter which the FR received concerning the legality of the illicit loans by the Building Society to Sean FitzPatrick had "gone missing". Management at Irish Nationwide used to arrange meetings with the FR for late on a Friday afternoon, knowing that the regulator's staff would not want for the encounter to last for more than an hour because it would nibble into their weekend.

June 2010 reports on the financial crisis did not ask the opinion of their consumer consultative panel, who in a statement said it was "very disappointed that, in particular, the report by the FR's ultimate head did not refer to the work of the panel in highlighting many of the failings of the regulator in the past number of years." Fresh areas of concern included the lack of minute-taking at senior levels in the Financial Regulator and among its board. "If this is the situation that prevails, then this has to be a source of concern regarding the standard of governance."

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One of the reports noted that the Financial Regulator had found substantial departures from credit policy during inspections of banks, but failed adequately to follow up on its concerns. Secondly intrusive demands from regulatory staff could be and were set aside after direct representations were made to senior regulators.

Almost simultaneously external reviewers highlighted the "unacceptable pace of investigation into how the financial system in Ireland came close to collapse leaves a lot to be desired. This was contrasted with the US and Iceland, which has moved faster to examine what went wrong. Furthermore, there has been very little outcome from on-going investigations into dealings at some of our major institutions by the Financial Regulator.

The European Commission in a November 2010 review of the financial crisis said Some national supervisory authorities failed dramatically. We know that in Ireland there was almost no supervision of the large banks.

Five years elapsed before the FR forced Davy Stockbrokers to inform investors, who lost tens of millions of Euro, that the instrument sold was not compliant with the Trustees (Authorised Investments) Order at the time of its sale as it was not listed on a recognised Stock Exchange and it "dealt as principal in both the purchase and sale and was in breach of the rules of the Irish Stock Exchange by not disclosing this fact on its contract note. The effected parties had settled their claim against the stockbroker, before receiving the notification, and it was suggested they could have received much more compensation if the FR had ensured that their adverse findings about the case was communicated. The full report was not published and no regulatory action was taken.

Within days, after the arrival in Ireland of the International Monetary Fund, they admitted that the stress tests on banks, that the FR conducted 4 months earlier "failed to convince financial markets and the level of capital that the banks needed which they recently described as at "shock and awe" safety levels would be increased by 50 per cent.

5.0

Fiscal Crisis 47

The Financial Crisis of 2008 affected the Irish economy severely, compounding domestic economic problems related to the collapse of the Irish property bubble. After 24 years of continuous growth at an annual level during 19842007, Ireland first experienced a short technical recession from Q2-Q3 2007, followed by a long 2-year recession from Q1 2008 Q4 2009. In March 2008, Ireland had the highest level of household debt relative to disposable income in the developed world at 190%, causing a further slowdown in private consumption, and thus also being one of the reasons for the long lasting recession. The hard economic climate was reported in April 2010, even to have led to a resumed emigration.

After a year with side stepping economic activity in 2010, Irish real GDP rose by 2.2% in 2011 and 0.2% in 2012, which was mainly driven by strong improvements in the export sector - while private consumption remained subdued. The economic challenges continued, however, as the prolonged European sovereign-debt crisis caused a new Irish recession starting in Q3 2012, which was still ongoing as of Q2 2013. In May 2013 the European Commission's economic forecast for Ireland predicted its growth rates would return to a positive 1.1% in 2013 and 2.2% in 2014.

In September 2008, the Irish government-comprising a coalition of Fianna Fil and the Green Party-officially acknowledged that the country had entered recession, with a severe rise in unemployment occurring in the following months. Ireland was the first state in the eurozone to enter recession, as declared by the Central Statistics Office. The numbers of people living on unemployment benefits rose to 326,000 in January 2009, the highest monthly level since records began in 1967 and the unemployment rate rose from 6.5% in July 2008 to 14.8% by July 2012. The weakening conditions drew 100,000 protesters onto the streets of Dublin on 21 February 2009, amid further talk of protests and industrial action. With the banks "guaranteed", and the National Asset Management Agency (NAMA) established on the evening of 21 November 2010, the then Taoiseach Brian Cowen confirmed on live television that the EU/ECB/IMF troika would be involving itself in Ireland's financial affairs.

Amid the crisis, which coincides with a series of banking scandals, support for the ruling Fianna Fil party crumbled; it fell to third place in one opinion poll conducted by The Irish Times an unprecedented event in the nation's history placing behind Fine Gael and the Labour Party, the latter rising above Fianna Fil for the first time. On 22 November, the Greens junior 48

members of the ruling coalition called for an election the following year. The February 2011 general election replaced the Fianna Fil Green Party coalition with the Fine Gael Labour Party coalition which has reminded in power ever since. This coalition continues with the same austerity policies of the previous coalition as the country's larger parties favour a similar agenda. Official statistics show a drop in most crimes coinciding with the economic downturn. Burglaries have, however, risen by approximately 10% and prostitution has more than doubled since 2007.

Figure 4: Workers Rise to Defend Themselves

Irish banks, already over-exposed to the Irish property market, came under severe pressure in September 2008 due to the global financial crisis of 20072010. Irish banks' foreign borrowings rose from 15bn to 110bn in 2004-08. Much of this was borrowed on a threemonth rollover basis to fund building projects that would not be sold for several years. When the properties could not be sold due to oversupply, the result was a classic assetliability mismatch. At the time of the 2008 government bank guarantee the banks were said to be illiquid (but not insolvent) by 4bn, which turned out to be a huge underestimate. 49

As the impact, the economy and government finances began to show signs of impending recession by the end of 2007 when tax revenues fell short of the 2007 annual budget forecast by 2.3 billion (5%), with stamp duties and income tax both falling short by 0.8 billion (19% and 5%) resulting in the 2007 general government budget surplus of 2.3 billion (1.2% of GDP) being wiped out. An imminent recession became clear by mid-2008. Subsequently, government deficits increased, many businesses closed and unemployment increased. The Irish Stock index (ISEQ) fell. Many immigrant workers left. Besides that, Anglo Irish Bank was exposed to the Irish property bubble. A hidden loans controversy in December 2008 led to a further drop in its share price. The ISEQ dropped to a 14-year low on 24 September 2009, probably triggered by the unexpected resignation of former Anglo Irish Bank director Anne Heraty from the board of the Irish Stock Exchange the night before.

Ireland entered into an economic depression in 2009. The Economic and Social Research Institute predicted an economic contraction of 14% by 2010. In the first quarter in 2009, GDP was down 8.5% from the same quarter the previous year, and GNP down 12%. Unemployment is up 8.75% to 11.4%. The economy exited recession in the third quarter of 2009, with GDP growing by 0.3% in the quarter, but GNP continued to contract, by 1.4%. The economy grew by 1.9% in Q1 and by 1.6% in Q2 of 2011 but contracted by 1.9% in Q3.

Due to the ending of the bubble, the residential and commercial property markets went into a severe slump with both sales and property values collapsing. Developers such as Liam Carroll began to fall behind on their loan repayments. Due to the financial crisis, banks such as ACC pushed for their revenue recovery and requested liquidation of the development firms.

Eurozone crisis The Eurozone crisis (often referred to as the Euro crisis) is an on-going crisis that has been affecting the countries of the Eurozone since late 2009. It is a combined sovereign debt crisis, a banking crisis and a growth and competitiveness crisis. 50

The crisis made it difficult or impossible for some countries in the euro area to repay or refinance their government debt without the assistance of third parties. Moreover, banks in the Eurozone are undercapitalised and have faced liquidity problems. Additionally, economic growth is slow in the whole of the Eurozone and is unequally distributed across the member states. Governments of the states most severely affected by the crisis have co-ordinated their responses with a committee dubbed "the Troika" formed by three international organisations: the European Commission, the European Central Bank and the International Monetary Fund. In 1992, members of the European Union signed the Maastricht Treaty, under which they pledged to limit their deficit spending and debt levels. However, in the early 2000s, a number of EU member states were failing to stay within the confines of the Maastricht criteria and turned to securitising future government revenues to reduce their debts and/or deficits. Sovereigns sold rights to receive future cash flows, allowing governments to raise funds without violating debt and deficit targets, but sidestepping best practice and ignoring internationally agreed standards. This allowed the sovereigns to mask (or "Enronise") their deficit and debt levels through a combination of techniques, including inconsistent accounting, off-balance-sheet transactions as well as the use of complex currency and credit derivatives structures.

From late 2009, fears of a sovereign debt crisis developed among investors as a result of the rising private and government debt levels around the world together with a wave of downgrading of government debt in some European states. Causes of the crisis varied by country. In several countries, private debts arising from a property bubble were transferred to sovereign debt as a result of banking system bailouts and government responses to slowing economies post-bubble. In Greece, high public sector wage and pension commitments were connected to the debt increase.

The structure of the Eurozone as a monetary union (i.e., one currency) without fiscal union (e.g., different tax and public pension rules) contributed to the crisis and harmed the ability of European leaders to respond. European banks own a significant amount of sovereign debt, such that concerns regarding the solvency of banking systems or sovereigns are negatively reinforcing.

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Concerns intensified in early 2010 and thereafter, leading European nations to implement a series of financial support measures such as the European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM).

Aside from all the political measures and bailout programmes being implemented to combat the Eurozone crisis, the European Central Bank (ECB) has also done its part by lowering interest rates and providing cheap loans of more than one trillion Euro to maintain money flows between European banks. On 6 September 2012, the ECB also calmed financial markets by announcing free unlimited support for all eurozone countries involved in a sovereign state bailout/precautionary programme from EFSF/ESM, through some yield lowering Outright Monetary Transactions (OMT).

The crisis did not only introduce adverse economic effects for the worst hit countries, but also had a major political impact on the ruling governments in 8 out of 17 eurozone countries, leading to power shifts in Greece, Ireland, Italy, Portugal, Spain, Slovenia, Slovakia, and the Netherlands.

The Eurozone crisis has become a social crisis for the most affected countries, with Greece and Spain having the highest unemployment rates in the currency area - both 27% in mid2013.

The Eurozone crisis resulted from a combination of complex factors, including the globalisation of finance; easy credit conditions during the 20022008 period that encouraged high-risk lending and borrowing practices; the financial crisis of 200708; international trade imbalances; real estate bubbles that have since burst; the Great Recession of 20082012; fiscal policy choices related to government revenues and expenses; and approaches used by nations to bail out troubled banking industries and private bondholders, assuming private debt burdens or socialising losses.

A research report, completed in 2012 for the United States Congress explains, The current Eurozone crisis has been unfolding since 2009, when a new Greek government revealed that 52

previous Greek governments had been underreporting the budget deficit. The crisis subsequently spread to Ireland and Portugal, while raising concerns about Italy, Spain the European banking system, and more fundamental imbalances within the Eurozone.

The underreporting was exposed sometime in the first quarter of 2010. The alarm of something smells spread throughout some of Europe when Greece revealed that its 2009 deficit was revised from 5% of GDP (no greater than 3% of GDP was a rule of the Maastricht Treaty) to more than double that amount: 12.7%. The fact that the Greek debt exceeded $400 billion and France owned 10% of that debt, struck terror into investors at the word default.

The Irish sovereign debt crisis was not based on government over-spending, but from the state guaranteeing the six main Irish-based banks who had financed a property bubble. On 29 September 2008, Finance Minister Brian Lenihan, Jnr issued a two-year guarantee to the banks' depositors and bond-holders.

The guarantees were subsequently renewed for new deposits and bonds in a slightly different manner. In 2009, an National Asset Management Agency (NAMA), was created to acquire large property-related loans from the six banks at a market-related "long-term economic value".

Irish banks had lost an estimated 100 billion euros, much of it related to defaulted loans to property developers and homeowners made in the midst of the property bubble, which burst around 2007. The economy collapsed during 2008. Unemployment rose from 4% in 2006 to 14% by 2010, while the national budget went from a surplus in 2007 to a deficit of 32% GDP in 2010, the highest in the history of the eurozone, despite austerity measures.

With Ireland's credit rating falling rapidly in the face of mounting estimates of the banking losses, guaranteed depositors and bondholders cashed in during 200910, and especially after August 2010. (The necessary funds were borrowed from the central bank.) With yields on Irish Government debt rising rapidly it was clear that the Government would have to seek assistance from the EU and IMF, resulting in a 67.5 billion "bailout" agreement of 29 November 2010. 53

Together with additional 17.5 billion coming from Ireland's own reserves and pensions, the government received 85 billion, of which up to 34 billion was to be used to support the country's ailing financial sector (only about half of this was used in that way following stress tests conducted in 2011). In return the government agreed to reduce its budget deficit to below three per cent by 2015. In April 2011, despite all the measures taken, Moody's downgraded the banks' debt to junk status.

In July 2011 European leaders agreed to cut the interest rate that Ireland was paying on its EU/IMF bailout loan from around 6% to between 3.5% and 4% and to double the loan time to 15 years. The move was expected to save the country between 600700 million euros per year. On 14 September 2011, in a move to further ease Ireland's difficult financial situation, the European Commission announced it would cut the interest rate on its 22.5 billion loan coming from the European Financial Stability Mechanism, down to 2.59 per cent which is the interest rate the EU itself pays to borrow from financial markets.

The Euro Plus Monitor report from November 2011 attests to Ireland's vast progress in dealing with its financial crisis, expecting the country to stand on its own feet again and finance itself without any external support from the second half of 2012 onwards. According to the Centre for Economics and Business Research Ireland's export-led recovery "will gradually pull its economy out of its trough". As a result of the improved economic outlook, the cost of 10-year government bonds, has already fallen substantially since its record high at 12% in mid July 2011 (see the graph "Long-term Interest Rates"). At 24 July 2012 it was down at a sustainable 6.3%, and it is expected to fall even further to a level of only 4% by 2015.

On 26 July 2012, for the first time since September 2010, Ireland was able to return to the financial markets selling over 5 billion in long-term government debt, with an interest rate of 5.9% for the 5-year bonds and 6.1% for the 8-year bonds at sale. By 2013 Ireland shouldered 41 billion (42%) of the total cost of the European banking crisis, or nearly 9,000 for each Irish citizen.

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6.0

The Climate of Public Opinion

Media There has been considerable controversy about the role of the English-language press in regard to the bond market crisis.

Greek Prime Minister Papandreou is quoted as saying that there was no question of Greece leaving the euro and suggested that the -crisis was politically as well as financially motivated. "This is an attack on the eurozone by certain other interests, political or financial". The Spanish Prime Minister Jos Luis Rodrguez Zapatero has also suggested that the recent financial market crisis in Europe is an attempt to undermine the euro. He ordered the Centro Nacional de Inteligencia intelligence service (National Intelligence Centre, CNI in Spanish) to investigate the role of the "Anglo-Saxon media" in fomenting the crisis. So far no results have been reported from this investigation.

Other commentators believe that the euro is under attack so that countries, such as the UK and the US, can continue to fund their large external deficits and government deficits and to avoid the collapse of the US$. The US and UK do not have large domestic savings pools to draw on and therefore are dependent on external savings e.g. from China. This is not the case in the eurozone, which is self-funding.

Politics Republic of Ireland February 2011, After a high deficit in the governments budget in 2010 and the uncertainty surrounding the proposed bailout from the International Monetary Fund, the 30th Dil (parliament) collapsed the following year, which led to a subsequent general election, collapse of the preceding government parties, Fianna Fil and the Green Party, the resignation of the Taoiseach (PM) Brian Cowen and the rise of the Fine Gael parliamentary party, which formed a government alongside the Labour Party in the 31st Dil, which led to a change of government and the appointment of Enda Kenny as Taoiseach.

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7.

Economic Downturn

Despite its international obligations and the economic, social and cultural rights guarantees in its Constitution, a review of the causes and consequences of Irelands economic crisis reveals that a meaningful commitment to the protection and fulfilment of these rights has not been at the heart of 31 government policy, either before or after the recession. This section examines the aspects of economic and social policy, along with broader contextual factors, which led to the predicament in which the country now finds itself.

A flawed model? Few would question the fact that Irelands growth figures averaging 9.6 per cent from 1995 to 2000 were impressive during the Celtic Tiger years. While there is some disagreement over the relative importance of factors driving the boom, there is a reasonable consensus over a number of the elements involved. Consistent investment in second and third level education one measure for which previous governments may be credited Fuelled productivity and provided an attractive resource for foreign investment. The presence of English as the main language was also advantageous, as was Irelands entry into the European Union, which supplied a steady flow of structural support while simultaneously offering access to new export markets.

Probably the most central element in Irelands short term economic miracle, however, was its low taxation and lax regulatory regime. The Revenue Commissioners tax take remained extremely low during the boom years. At 31.2 per cent of Gross Domestic Product (GDP) in 2007, it was 6 points below the EU average (taxation is discussed in greater detail below). Irelands corporate tax rate lies at 12.5 per cent, the lowest of the major European economies and a source of some consternation among its EU partners. Though the economy as a whole was growing before the considerable cuts in top income tax rates, there is little doubt that this comparatively diminutive tax rate helped attract the massive flows of US and other investment that poured into Ireland during the 1990s. By the end of the 20th century the Emerald Isle, having established itself as a base for computer giants such as Microsoft, Dell and HewlettPackard, had become the biggest exporter of software in the world. It was not only technology investors who were pumping resources into the country. Irelands less than-exacting standards of financial regulation helped establish it as a tax haven for global finance, with offshore financial services outpacing other types of inward international investment by approximately 357

to-1 in 2007. The Irish Financial Services Centre (IFSC), located on the banks of the River Liffey in Dublin, became infamous for the empty and unused offices rented out by multinational corporations seeking to channel their finances through Ireland and thus avail of advantageous tax rates. Many of these organizations transferred their headquarters from the Netherlands, which had previously been regarded as the top destination in Europe for companies seeking to avoid contributing to public coffers. By 2008, investment in the IFSC - most of which was quickly reinvested elsewhere and thus largely detached from Irelands real economy and tax base - was over 13 times the size of foreign direct investment, and approximately 11 times larger than total Gross National Product (GNP). Notoriously lax regulation, particularly in the banking and insurance sectors, famously prompted the New York Times to label the country the Wild West of European finance and inevitably ruffled a few feathers among Irelands trading partners, all the while helping major multinational corporations cut their taxes back home. More importantly, Irelands failure to adequately regulate this enormous influx of financial activity - exposing its economy to foreseeable yet under-investigated risks - may have proven a major contributing factor in the countrys financial collapse.

Successive governments justified this adherence to an economic policy based on liberalization, privatization and financial de-regulation by repeating arguments that it would result in economic growth lifting all boats and generating the needed revenue to consolidate Irelands social and economic progress. Rising social welfare transfers during the Celtic Tiger years did make a significant impact on several economic and social rights indicators, but it was a quick-fix recipe built for disaster, redistributing the bulk of Irelands newfound wealth to the countrys existing elite, and setting the stage for a financial and economic collapse. In as much as this financial crisis has resulted in severe economic and social rights cutbacks, the Fianna Fil governments efforts to protect human rights against the activities of private financial institutions were at best questionable.

Homesick A lack of concern for the provision of accessible, affordable, adequate and quality housing, in keeping with Irelands human rights obligations, has characterized the policies of successive governments. One of the key causal factors of the current quagmire was a huge housing bubble, fuelled by government policies, which burst in spectacular fashion in 2007. While some commentators also point to cultural and sociological factors underpinning the boom, it seems 58

clear that demographic factors combined with low interest rates and high-risk lending to fuel a speculative mania focused on the housing sector.

The average price of a second-hand home rose from 83,000 to 512,000 between 1994 and 2006. Some 93,000 houses were built in 2006, representing 21 for every 1,000 people in the population, as compared to a European average of 5 per 1,000. Prices were also driven up by an oligarchy of landowners who manipulated the market to ensure they received a disproportionate share of the value of homes sold. The behaviour of these actors, who also benefitted from windfalls derived from rezoning decisions, likewise pushed up the cost of infrastructural investments. The effects of such rezoning practices were foreseeable, having been the target of complaints for over three decades. Irelands membership of the European currency also contributed to the soaring prices, as the state lost the ability to set interest rates, one of the tools that might otherwise have been used to dampen inflation in the housing sector. With a torrent of revenue flowing to its coffers from the construction and real estate sectors, the state failed to deploy other measures to slow down what had become a runaway train. And as a larger and larger proportion of the population committed themselves to mortgages they could ill afford, so public support for policies that might cool the market such as the removal of tax breaks and subsidies seemed less and less practicable. Warnings from the Organization for Economic Cooperation and Development (OECD) and the IMF went unheeded as successive budgets provided more and more incentives to property developers and prospective buyers. At its peak, the housing sector represented 16 per cent of gross national income, the highest level of any OECD country. This left the Irish economy disproportionately exposed to fluctuations in the housing sector, which were to manifest fatefully when major property developers found themselves unable to pay back the enormous debts they had taken on, thus throwing the banking sector, and the country as a whole, into a protracted financial crisis.

Breaking the banks Underpinning the frenetic building and buying of properties was the equally enthusiastic provision of credit to all those taking part in the enterprise, with little apparent concern for preventing and protecting against the human rights consequences that might come later. During the Celtic Tiger years, the capital for Irelands eager developers was raised on international markets, with Irish banks importing vast sums in what Reinhart and Reinhart 59

dubbed a capital flow bonanza. This in turn drove consumer demand to ever-higher levels, as Irish society dug itself into a deep hole of indebtedness. When the international banking crisis hit in 2007, just as the property bubble was getting ready to burst, it became clear the Irish economy was about to enter very stormy seas. A great many Irish households would be pulled under by the rising tide, with the Irish think-tank the Economic and Social Research Institute (ESRI) predicting that most of those who bought during the boom would be trapped in negative equity for the next 20 years. While overzealous lending and development projects were both contributing factors, the governments failure to take measures to ameliorate and remedy the consequences of such practices was perhaps the most lamentable aspect of the debacle. Having allowed the exchequer to become over-dependent on revenues from stamp duty and other property-related taxes, the state was little inclined to question what had become a useful cash cow. When the government eventually did step in, it was too late to stop the country from falling over the edge.

Transparency in the banking sector has been questionable, at best. By the time Irelands long economic boom reached its crescendo, the most controversial of the countrys financial actors, Anglo Irish Bank - which was found to have manipulated its balance sheets for years while granting huge loans to its own directors - was massively overexposed to debt default thanks to its heavy involvement in the property sector. Allied Irish Bank (AIB) and Bank of Ireland (BoI), the countrys two biggest banks, were likewise teetering on the brink after overextending themselves in their relationships with developers. In a clumsy bid to quell growing anxiety in the markets, the Fianna Fil government announced it would guarantee all deposits in Irelands principal financial institutions. This September 2008 decision, effectively socializing the huge debts racked up by opportunistic lenders and overconfident developers, was to be one of the most controversial of an administration that would soon be voted out in a groundswell of public outrage. This bank guarantee was complemented a few months later by the establishment of the much-criticized National Assets Management Agency (NAMA). The institution was set up with the intention of addressing the credit crisis in the Irish economy. With the value of their loan assets having crashed, Irelands major banks were facing difficulties in meeting capital requirements and their lack of collateral, which might otherwise have facilitated repurchase agreements to boost cash-flow, led to severe liquidity problems. Taken together, these factors were reportedly strangling credit provision in the Irish economy and, as a result, any chance of a return to meaningful growth. The governments response was to set up NAMA, which uses government bonds to purchase the banks bad debts and in so doing 60

socializes the costs incurred by their incautious lending. Though it claimed it would eventually run a profit while kick-starting free-flowing credit provision, NAMAs legacy may turn out to be a CESR Mauled by the Celtic Tiger: Human rights in Irelands economic meltdown crippling level of national debt that serves to undermine the economic and social rights of ordinary people long into the future. In April 2011 it was decided, with the consent of both the IMF and EU, to halt asset transfers to NAMA, with Finance Minister Michael Noonan admitting there must be a better way of doing things. In the time since, frequent comparisons have been drawn between Ireland and Iceland, which for its part opted to adhere to traditional free market ethics by letting overextended banks fail. Former World Bank Chief Economist Joseph Stiglitz dismissed justifications for the Irish bank bailout, stating that it was a straightforward transfer of wealth from taxpayers to bondholders, amounting to an act of highway robbery. Other countries such as Norway, Sweden and the United States, he argued, had allowed numerous bad banks to fail without the devastation predicted by the financial sector ever coming to pass. Professors Baldur Thorhallsson and Peadar Kirby meanwhile demonstrate that, although the economic shelter provided by membership of the European Union and European currency may have softened the impact of the banking crisis, concomitant limitations on domestic monetary and exchange rate policy options may have served to exacerbate it. It is noteworthy that Irelands banking crisis grew out of a financial culture in which opportunism and impunity were ingrained.

Irelands financial regulator, having previously abdicated responsibility in the face of the Deposit Interest Retention Tax (DIRT) and Ansbacher tax evasions schemes, likewise failed to step in when it became aware of improper practices at Anglo, or indeed the dangerous lending strategies being deployed by the sector as a whole. In this way, it continually disregarded the legal obligation of all state authorities to protect against human rights infringements by private actors. Initial attempts to reform financial regulation in the country, by replacing the Central Bank and the Financial Services Regulatory Authority with a single institution, were deemed an outright failure with the challenge of revolutionizing Irelands banking culture cited as the main problem. More recent efforts to improve the Central Banks effectiveness, with a renewed focus on risk management and executives pay, have been more encouraging. The yet-to-been acted Central Bank (Supervision and Enforcement) Bill is designed to strengthen regulatory powers and provide protection for whistle blowers. In a similar vein, it is to be hoped that the recent establishment of an independent budget watchdog, the Irish Fiscal Advisory Council (IFAC), as demanded by the EU and IMF as part of a bail-out agreement, will be the first step towards 61

creating effective regulatory bodies throughout the financial sector. The IFAC, which does not enjoy civil society participation, delivered its first report in October 2011, calling for even deeper cuts in spending than those already planned. As a result of the financial and economic crisis, Irish public sector debt skyrocketed from a comparably low 27 percent of GDP to a projected 119 percent of GDP by 2013. A recent independent debt audit found that the lions share of current government debt stems directly from the financial crisis, the decision in September 2008 to rescue the Irish financial sector en masse, and the subsequent bank guarantees. As subsequent sections will show, the ongoing economic quagmire precipitated by the mishandling of the banking crisis has severely stifled economic and social rights in the country.

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8.0

Implication of Challenges Faced by Celtic Tiger

The governments response to the economic crisis looks set to worsen the economic and social rights situation in the country rather than improve it. This section explores Irelands economic recovery strategy, with a particular focus on recent austerity budgets and the countrys policy planning with regard to social welfare and other areas of relevance to economic and social rights. The National Recovery Plan, comprising 10 billion in expenditure cuts and 5bn in tax increases, is assessed along with the crippling impact of the EU-IMF bailout package and the decision to socialize losses incurred by overexposed banks. Irelands tax regime, and its consequences for economic and social rights provisions, is also analysed. While acknowledging some positive steps taken more recently, CESRs analysis argues that the substantive and procedural human rights principles of non- discrimination, non-retrogression, primacy of human rights, transparency, participation and accountability have been largely ignored in the design and implementation of recovery measures. Disproportionate cuts made to official human rights bodies in the face of retrogressive policy measures have allowed this process to go unchallenged. The best laid plains Irelands social policy framework is set out in a number of policy documents which set out strategies and targets in such areas as social inclusion, employment, health, education, housing and income support. These are referenced here as part of the assessment of government policy efforts to safeguard economic and social rights in relevant areas of socioeconomic policy. The National Action Plan for Social Inclusion 2007-2016 (NAP Inclusion) sets the target of reducing the number of people experiencing consistent poverty to between 2 per cent and 4 per cent by 2012. It also promotes primary health care teams and social housing, both important harbingers of economic and social rights fulfilment. Irelands social protection and welfare programmes are also underpinned by the ten-year national partnership agreement Towards 2016. The latest in a series of accords negotiated between the government, business leaders, trade unions and the voluntary sector, the document aims to provide consensus on the nations approach to development. It sets out 23 high-level goals on poverty, development and social inclusion. With regard to economic and social rights, one of the most important elements of Towards 2016 was the commitment to benchmark base social welfare payments at 30 per cent of gross average industrial earnings. This standard represented the fruition of years of

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campaigning on the part of Irelands anti-poverty movement. Nonetheless, in the absence of explicit recognition of economic and social rights in national legislation, the failure to comprehensively frame these commitments in terms of the economic and social rights obligations of the state towards its people leaves these positive measures vulnerable to changes in government and largely defenceless in the face of weakened economic conditions. In contrast to previous development strategies, the National Recovery Plan 2011 2014 (NRP), which has now become the central reference for policy- making, is a product of negotiations with the IMF and EU (discussed further below) rather than domestic social partners. As highlighted by the UN Special Rapporteur on Extreme Poverty and Human Rights, there has been a clear lack of popular participation in both the design and implementation of crisis response measures. In the context of a country that has one of the lowest tax takes in Europe, the NRPs reliance on expenditure cuts for the bulk of the necessary savings - rather than on progressive tax reforms - has undermined economic and social rights, as is demonstrated in subsequent sections. Backsliding on hard-fought commitments to basic social welfare protections amounts to making the poor and most vulnerable pay the consequences of a financial crisis spawned by the excesses of Irelands irresponsible bankers and real-estate developers. Considering the role lax regulatory practices played in bringing the crisis about, it is to be lamented that there have been no effective accountability processes in the aftermath of the debacle. Though it was promised that this issue would be addressed by Oriechtas inquiries and a Commission of Investigation into the Banking Crisis, these have not resulted in anyone being legally held to account. Public outrage over the crisis eventually led to Fianna Fil being ejected from power in February 2011. The successor government, a Fine Gael- Labour coalition, promptly published a new Programme for Government covering a five-year period from 2011 to 2016. Some positive steps have been taken by the ruling coalition. It has pledged to renegotiate the EU-IMF deal, reversed the changes to eligibility criteria were deployed which could further reduce state support to vulnerable people. Civil society participation in the design of Irelands budgets is facilitated through a regular pre-budget forum staged by the Department of Social Protection. Those concerned with the welfare of vulnerable communities report that their voices have not been 64

adequately taken into account in recent years, however, as the drive for austerity has taken precedence. The government has made rhetorical affirmations that the most vulnerable are protected under existing budget plans. Though the percentage drop in income may be less among low-income families, the real impact on their welfare is likely to be much greater, however. Assertions that welfare cuts are justifiable on the grounds that payments increased between 2004 and 2007 meanwhile fail to appreciate that these rises simply served to keep pace with inflation. More importantly, Irelands most vulnerable should not have to bear the costs of a crisis they had little hand in creating. The EU-IMF-ECB bailout: Help or Hindrance? While the Irish state is ultimately responsible for the welfare of its people, the role of international organizations in prescribing policies which have risked undermining the economic and social rights of the Irish people must also be recognized. The rescue package agreed in late 2010 between the Fianna Fil government, the International Monetary Fund, the European Union and the European Central Bank (ECB), unless effectively renegotiated, is likely to limit economic and social rights enjoyment long into the future. In examining the bailout, it is important to consider the role of broader international pressures. When the crash came, English, French and German financial institutions were overexposed to the Irish financial markets, and it was feared that the collapse of the Celtic Tigers banks would paralyze, or at the very least significantly weaken, the European banking system as a whole. Moreover, with yields on Portuguese and Spanish bonds rising, the view from Brussels was that it was imperative to shore up Irelands banks in order to prevent contagion to the rest of the continent. In November 2010 the EU and IMF therefore stepped in with an 85-billion bailout deal, which according to one Dublin think-tank was not a bailout for Ireland, but rather a bailout of the European banking system by the Irish taxpayer.100 Comprising 35 billion for the banks including 10 billion for immediate recapitalization and 25 billion for bank contingencies along with another 50 billion to cover budget deficits between 2011 and 2015, the deal effectively committed the country to extracting close to 30 billion from the economy over a five-year period. The only references to social provisioning in the Memorandum of Understanding (which essentially mirrors the aforementioned National Recovery Plan) take the form of demands for cuts and efficiency. Irelands human rights obligations, not to mention those of other EU or IMF member states, were hence ignored. Furthermore, Irish civil society was denied any meaningful input into the design of the plan. Since 65

the deal was agreed, the IMF-EU-ECB troika has engaged in dialogue with the social partners, including unions and selected non-governmental organizations, but the concerns they express appear thus far to have been side-lined as the drive for further austerity measures continues. Given the magnitude of the debt crisis, which was clearly beyond the resuscitative capacities of the Irish economy alone, it can be argued some form of external assistance was inevitable. But with European banks having permitted and to some extent colluded in the excesses of the Irish banking sector, the argument has been made that the IMF and EU, rather than simply protecting these companies from the fiasco, should have recognized their respective responsibilities by pressuring those banks proven to have behaved irresponsibly to take on some of the debts themselves through an equity swap.104 This would involve creditor banks agreeing to forego some proportion of outstanding debt in exchange for an ownership stake in the struggling debtor company. The ECB also had the option of taking over the debts itself, with the Irish government agreeing to pay back some proportion of the total amount, or requiring the bondholders who were likewise complicit in the debacle to take some responsibility. Indeed IMF negotiators recognized that their organization was open to the latter option, but the ECB was vehemently opposed. In the end, rather than considering any of these avenues, which might have gone some way to preventing the human rights consequences of the meltdown and the subsequent austerity trap, the ECB chose to place the entire bill on the doorstep of the Irish taxpayer, with most vulnerable facing the brunt of the predictable backsliding in social protections. The implications of having this financial millstone tied around the countrys neck are only beginning to manifest. Along with successive rounds of cuts to health, education and social welfare spending, the economic and social rights of vulnerable Irish people will also be prejudiced by inauspicious levels of growth for years to come as the country struggles to keep up with repayments. Moreover, the decision to source 12.5 billion for the package from Irelands National Pension Reserve Fund, plunging it into bank recapitalization, precluded the use of these resources for alternative stimulus measures such as job creation programs. Ongoing renegotiation efforts by the new Taoiseach (Prime Minister), Enda Kenny, may go some way to easing the pain of economic restructuring, but it remains to be seen whether this will translate into a restoration of social spending. Meanwhile, hopes that the involvement of the IMF might usher in a new era of transparency in Irelands traditionally secretive financial sector have yet to come to fruition. Moves to protect whistle blowers may go some way to 66

improving matters in this regard, but progress overall remains incipient at best and the Fund itself has pressed for more openness. Even the Irish Banking Federations chief executive has recognized that the countrys opaque financial sector still has a long way to go in achieving adequate transparency standards.

Taxation: Broken by Breaks In accordance with the ICESCR, the Irish government is obliged to dedicate maximum available resources to the provision of economic and social successful in driving competitiveness and growth - allowing Ireland to outcompete other jurisdictions for investment inflows - remains strong even in the wake of the deepest economic crisis in living memory. Indeed, Ireland remains one of the lowest-tax economies in the European Union (see box), with a total tax take of just 28 per cent of GDP, as compared to an average of 36 per cent across the EU. Only Latvia and Romania source less revenue from taxation. Denmark and Sweden, two of the most economically competitive economies in the world, meanwhile enjoy tax contributions of 48 and 46 per cent of GDP respectively. By 2015, Irelands total tax take when excluding high interest payments on debt is estimated to drop to 26 per cent of GDP, putting severe strains on public expenditures when they are most needed. The countrys insistence on low overall tax rates at any cost has now manifested in an economic recovery plan that prioritizes spending cuts over tax increases at a ratio of 2:1. Low and middle-income households in Ireland, who are facing substantial burdens due to cutbacks in social protections, have likewise been adversely affected by changes in the tax regime over the past 15 years, as described in more detail below. A central element of the Celtic Tigers economic strategy was its tax regime, with especially low rates of corporate taxation, capital mobility and lax financial regulation. Despite being challenged, the ingrained belief that low taxation rates have been singlehandedly they only paid 20 per cent in tax, despite facing a marginal income tax rate of 41 per cent. Some 3,800 individuals with earnings of over 100,000 meanwhile paid no tax on their incomes whatsoever in 2007 due to tax breaks on property and business investment, along with tax reliefs on trading losses. The reason for Irelands low tax rate resulting in higher revenues than some of its neighbours is that the country has used its low-tax regime to attract multinational businesses (especially financial institutions) from abroad, in theory taxing the profits gained in other countries. Several loopholes exist, however, allowing many multinationals to go almost 67

untaxed. As discussed above, the ability of many companies to route profits through Ireland on the way to paying little if any tax in any jurisdiction has pushed Ireland into the realm of a tax haven, with pernicious effects in these companies home countries, as well as in Ireland. An estimated 7.64 billion are lost to illegal tax evasion in Ireland, a substantial sum in what are perceived to be austere times. This figure is several times the 1.24 billion removed from the social protection budget between 2011 and 2012. While Ireland has taken some initial steps to fight tax evasion, the shadow economy remains a substantial player in Ireland, with direct impacts on the ability of Ireland and other countries to meet human rights obligations. With an overwhelming debt burden hovering over Ireland for the near future, revenue increases rather than cutbacks in public services are a matter of justice as much as they are a matter of economic necessity. In this regard, an incremental increase in the effective tax rates of corporations and high income households to European norms would, according to projections, result in substantial budget surpluses by 2015, liberating a significant base of resources to invest in economic and social rights fulfilment. Indeed, had Irelands total tax take been equal to EU average levels in recent years, there may have been no fiscal crisis to begin with. Of course, untimely or excessive tax increases in an uncertain, fragile economic climate can have detrimental economic and public revenue impacts. In the Irish low-tax context however, there is substantial space to build more progressivity into the system, with beneficial results in boosting the public budget without placing the burden of deficit reduction on retrogressive measures such as social expenditure cuts. Oversight undermined: cuts to human rights institutions Human rights are not a luxury good that can be dispensed with when the national coffers start running low. State institutions designed to protect the economic and social rights of Irish people were first in the firing line when the Fianna Fil government began to tighten the purse strings, however. Disproportionate cutbacks levied against certain key welfare and rights institutions have provoked allegations that the Fianna Fil administration deliberately sought to silence voices of dissent in the face of a deeply regressive policy programme. Perhaps the most striking example of this was the decision, in the face of economic crisis, to close down the Combat Poverty Agency (CPA). This institution, which played an 68

important role in the advances made in poverty reduction between 2003 and 2007, was decommissioned in 2009. Its functions were absorbed, on paper at least, into the Office for Social Inclusion, which subsequently became part of the Department of Community, Equality and Gaeltacht Affairs, leaving no independent statutory body focused specifically on poverty. The Irish Human Rights Commission (IHRC) has likewise come under budgetary attack, with funding tightened to such an extent that the institution has effectively been crippled. When the cuts began there was a general edict for a cut in spending of 10 per cent across all departments, but the IHRC was cut by 32 per cent, explained IHRC member Michael Farrell.

People are working beyond their capacity and theres no money at all for research, publications and so on. Theres also a public service embargo so you cant replace anybody who has left, and because of the pressures staff have left; theres only one person left doing policy work. The IHRCs budget was again reduced by 5 per cent in the 2011 budget, and by a further 3 per cent in 2012. It is a similar story at the Equality Authority (EA) which was left hamstrung when 43 per cent of its funding was taken away in 2008. It was also decided to move the organization to the rural town of Roscrea in County Tipperary, less well connected to the communities it was set up to support. The Authoritys CEO Niall Crowley resigned in protest at the move, asserting that senior civil servants viewed the EA as a threat and their real goal was to scupper its work. In September 2011 it was announced that the Equality Authority and the Human Rights Commission would be merged into a single body. The new governments declared commitment to ensure the effectiveness of the new Human Rights and Equality Commission, and to reinforce its capacities in accordance with the Paris Principles, is to be welcomed, though it remains unclear whether this will include the restoration of previous funding levels. The National Consultative Committee on Racism and Interculturalism a crucially important institution in a country that recently experienced its first significant waves of immigration was meanwhile dissolved altogether. This last decision is all the more worrying given the countrys increasing demographic diversity, despite the end of the boom that attracted so many foreign nationals to Irish shores, and the downturn is unlikely to help the delicate process of integration. Already, the lack of an appropriate institutional response to the problem of racism is being cited as a factor fuelling racist violence in the country. Furthermore, the particular marginalization facing immigrant communities, and the barriers they face in accessing social services and welfare supports, makes the work of such institutions all the 69

more important.

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Double impact: Economic and social rights hit by downturn and austerity measures A review of the various planning documents and policy measures implemented both during Irelands boom years and in the wake of the crisis indicates that the countrys human rights obligations have been largely ignored in economic governance in recent times. The new administrations declaration that human rights would be embedded in the functioning of all public bodies is to be welcomed, though it remains to be seen how this commitment will be implemented and little guidance has been offered in this regard. Keeping in mind the standards and obligations set out in the human rights treaties Ireland has ratified, this section analyses specific economic and social rights and specific population groups particularly adversely affected by Irelands pre- and post-recession policies. It highlights apparent links between the deterioration in human rights outcomes in recent years and the retrogressive policy measures taken in each area, particularly with regard to spending cuts in these areas. Comparing indicators of economic and social rights outcomes with data on corresponding policy and fiscal efforts is a critical step in assessing Irelands compliance with its international human rights obligations.

Labour pains: the right to work

The devastating impact of Irelands economic meltdown is nowhere more evident than in growing queues outside job centres and social welfare offices. For the people of the country, the return of mass unemployment represents the reopening of a barely- healed wound, with the 1980s jobs crisis and the huge waves of emigration that went with it hardly forgotten. Employment figures in the boom years were astounding. As the countrys economy grew through the decades of the 90s and 00s, the proportion of the adult population out of work went from being the highest in the EU to the lowest. In 2001 unemployment stood at an historic 3.6 per cent, in sharp contrast to the previous peak of 17 per cent recorded in 1986. At the height of the boom, in the Spring of 2007, some 2,114,000 people were working in Ireland, the highest number in its history. Then came the crash. Of all the economic and social rights in Ireland, the human right to work was hit the most acutely in the initial onset of the economic crisis. Irelands unemployment rate skyrocketed over 250 per cent, from 4.2 per cent to 14.1 per cent

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between January 2005 and January 2011, four-fifths of that increase coming just after the crisis in 2008. The rate of long-term unemployment (those who have been unable to find adequate work for over a year) more than doubled between 2009 and 2010. By the third quarter of 2011 it accounted for 56 per cent of overall unemployment, with devastating consequences for thousands of vulnerable households. Setbacks in the enjoyment of the right to work have not been evenly felt. Construction workers were among the worst affected, with employment in this sector slumping by 53 per cent between Spring 2007 and Spring 2010. Young people have also been hit disproportionately hard, with recent estimates putting the proportion of under-25s who are out of work as high as 29 per cent.152 Women workers have likewise faced more vulnerability in the wake of the crisis, with official female unemployment rising some 15 per cent in the year to March 2011 while male unemployment went up by 3.5 per cent. Other vulnerable groups, such as Travellers, migrants and people with disabilities, also face stiff challenges in acceding to the labour market. The Irish government meanwhile denies asylum seekers the right to work in more explicit terms, through legislative prohibitions. While the official rate at which unemployment is rising seems to be slightly tapering off at 14 per cent in early 2012, the right to work will remain a critical problem for the foreseeable future.

Resurgent poverty: the right to an adequate standard of living Significant progress was made in addressing poverty in Ireland during the latter years of the Celtic Tiger. Poverty levels dropped year after year between 2004 and 2008, with increasing social welfare transfers playing a crucial role. Of the 225,000 people who were lifted out of poverty over the past decade, the most marked falls have been among those who have received these transfers, such as the unemployed and retired. According to Irelands Central Statistics Office (CSO), in 2010 the at risk of poverty rate would have been 51 per cent, rather than the actual figure of 15.8 percent, were it not for social transfers. Spending on education, health and other such in-kind services meanwhile reduced poverty in the country by some 60 per cent, according to the OECD. But despite these provisions, the onset of the economic crisis and the subsequent austerity-driven cutbacks in social services have contributed to the continued prevalence of poverty. Given that the crisis in Ireland is still unfolding, there will be some time-lag before the 72

full impact on people living in poverty can be fully appreciated. Current trends suggest that the official target of eliminating consistent poverty by 2016 is in jeopardy. The most recent data from the Central Statistics Office shows that the proportion of the population at risk of poverty, meaning their annual income is below 60 per cent of the median income level, rose from 14.1 per cent in 2009 to 15.8 per cent in 2010. Measures of consistent poverty (those on a low income and unable to afford basic necessities) showed a significant jump from 4.2 per cent in 2008 to 6.2 per cent in 2010, and far gloomier outcomes are likely as social spending cuts continue to manifest in the years to come. The numbers of people experiencing material deprivation rose by a staggering 90 per cent between 2007 and 2010, with some 22.5 per cent of the population finding themselves unable to meet the costs of basic needs such as adequate meals and clothing. Of great concern is the fact that children are some of the worst affected, with the deprivation rate of under-17s jumping from 23.5 per cent in 2009 to 30.2 per cent in 2010.163 Some 35,000 children are reported to have been forced into poverty between 2007 and 2009,164 and this sectors right to live free of poverty is likely to be further undermined by cuts to child benefit payments in the 2012 budget. Lone-parent households are the most vulnerable sector in Irish society, with 35.5 percent at risk of poverty in 2009. In the context of rising fuel and health costs, the decision to freeze the state pension until 2015 will meanwhile have a particularly pernicious impact on older people, who are particularly dependent on transfers from the social welfare system. According to CSO calculations, 88 per cent of this sector would face poverty in the absence of social welfare provisions. Non-nationals are disproportionately marginalized, too, with 18.4 per cent at risk of poverty, as compared to 14.4 per cent in the general population. Inequality is also rising as the crisis ramifies through vulnerable communities, with the ratio between the highest and lowest income quintiles jumping nearly 30 per cent in just one year, from 4.3 in 2009 to 5.5 in 2010. This trend is all the more worrying given that Ireland already ranks among the most unequal countries in the EU, and that inequality actually worsened during the boom years as higher earners increased their share of overall income. Income inequality in Ireland is estimated to have gone up by some 11 percentage points since the onset of the crisis. Meanwhile, the Habitual Residence Condition (HRC), which requires recipients of social assistance to prove their connection to Ireland, seems to prejudice migrants, asylum seekers, Travellers and returning emigrants. It also implies that certain 73

universal payments, such as child benefits, are not in fact universal in real terms. Long delays in formal social welfare appeals procedures, often running to more than a year, meanwhile suggest welfare entitlement accountability systems are failing.175 Ireland also faces stark regional divergence in the incidence of poverty, with communities in the Midlands and MidWest experiencing poverty levels more than twice as high as those in Dublin. Home truths: The right to adequate housing The enjoyment of the human right to adequate housing has also suffered setbacks during the economic crisis. The number of households on waiting lists for social housing has risen by 75 per cent post-crisis, from 56,000 in 2008 to 98,000 in March 2011. The lack of foresight or integrated planning that characterized the decline of the Celtic Tiger is meanwhile embodied in the countrys ghost estates entire housing complexes, built amidst the giddy excesses of Irelands property boom, that now lie empty or uncompleted. In 2010 it was estimated that nearly one in five Irish homes were vacant. Despite the crash in the property market, affordable housing remains out of reach for many Irish people. As far back as 2004, the National Economic and Social Council warned that an extra 73,000 social housing units would have to be built by 2012 if the state was to keep pace with the countrys needs. While over 22,000 new properties were either bought or acquired by local authorities between 2005 and 2008 in order to provide sufficient levels of social housing, this measure still appears to fall far short of what is actually needed to fulfil the right to adequate and affordable housing. Waiting lists for social housing continue to soar, and much of the accommodation provided to those in need is substandard. Moreover, the number of acquisitions dropped dramatically from 2,002 in 2007 to 787 in 2008 as the economic crisis began to take hold. The new Fine Gael-Labour coalition has promised a staged purchase scheme to increase the stock of social housing, though details of the plan remain vague at the time of writing. Astoundingly in this context, the social housing budget was slashed by 36 percent in 2011, and the allocation for capital expenditure in this area received a further cut of 26 per cent for 2012. The 2002 decision to amend the Planning and Development Act (PDA), which required developers to dedicate 20 per cent of all housing to social purposes, represented a more explicitly regressive step. The amendment allowed developers to provide financial compensation in lieu of housing units, resulting in the relative number of social housing units 74

built plummeting as a direct result. Moreover, tax incentives offered to private developers, along with their growing influence over planning decisions, were responsible for the soaring prices that placed adequate housing beyond the means of so many families (and eventually contributed to the broader economic collapse) in the first place. Another key element of Irelands provisions for housing is the Rental Accommodation Scheme, (RAS), which provides subsidies for private domestic rent and aims to prevent substandard living conditions and long-term dependency on rent supplement. With close to 100,000 families currently in receipt of rental subsidies, there is concern over the slow pace at which eligible households are being transferred from rent supplement to RAS, and the as-yet unclear changes to each of these provisions that may be made in order to meet conditions of the IMF- EU bailout in the future. Furthermore, civil society groups complain that the 2009 Housing (Miscellaneous Provisions) Act, which is designed to address unacceptable standards in rented housing, has not been properly implemented.

Irelands homeless, though relatively few in number, meanwhile remain the most shocking expression of the lack of enjoyment of the right to housing. It is estimated that around 5,000 people remain homeless in the country, despite the target of eliminating homelessness by the end of 2010 established in the planning document Towards 2016. This number reflects a rise of almost 100 percent on the number recorded in 1997, and a regrettable reversal after significant falls in levels of homelessness between 2002 and 2005. It is feared that unsustainable mortgages may be contributing to this problem, as over-indebted homeowners find themselves unable to keep up their payments. Furthermore, there was no civil society participation in the Interdepartmental Working Group on Mortgage Arrears, which was set up to tackle the growing problem of families unable to meet their mortgage commitments. In sum, the policies put in place during the Celtic Tiger years, rather than protecting the right to housing, have had an undermining effect. Incentives supplied to property developers, combined with poor planning and regressive legislation, served to make decent accommodation unaffordable for many thousands of families. Inadequate budgetary, policy and legal provisions suggest that the country is still falling far short of its legal obligation to fulfil the right to adequate and affordable housing. And with rising levels of mortgage default expected to continue for some time, grey skies look set to hang over the issue of affordable housing in the country well into the future. 75

The right to health: in need of a remedy Irelands health care system has been struggling for some time. And the age of austerity now being faced by the Irish people looks set to bring continued suffering. The 543 million (or approximately 4 per cent) adjustment announced in the 2012 budget followed on from a reduction in spending of 746 million (5 per cent) in 2011, and 800 million (5 per cent) in 2010. Moreover, with only 10 per cent of households in lower income groups enjoying private medical cover, as compared to 55 per cent of higher income households, it is likely that less-well off sectors will be particularly hard hit by these downward adjustments to health provision. The Irish health service was not in a particularly strong position to start with. While expenditure on health rose significantly between 1997 and 2007, helping bring the country into line with OECD averages in terms of health spending as a proportion of GNP, chronic inefficiencies in the delivery of services reportedly continue to hinder protection of the right to health. In this regard, the challenge facing the Irish health system is not just protecting resource flows, but also ensuring that fiscal inputs are efficiently translated into improved health outcomes. The weak system of primary care currently results in high numbers of avoidable hospital admissions. Progress in the creation of primary care teams, which bring health care professionals in an area together to facilitate a more integrated and accessible service, has been much slower than expected. Similarly, broader use of generic drugs would help tackle the wastefulness that currently besets the system. Ireland must also address the low number of general practitioners, and other types of doctors, available to the public, along with the insufficient number of consultations per doctor. Though the country has a higher proportion of nurses than most other OECD members, and has developed a range of nurse-led health services as a result, this cannot be regarded as an alternative to fuller provision of doctors. The current system is also riven with inequities. Some 19 per cent of the population does not have either a medical card, which enables holders to access free medical care, or medical insurance. It is noteworthy that this failure in the provision of health coverage has been growing in the 25-34 age group in recent years. Given that the income threshold to be eligible for a medical card is far below the poverty line, many people living in poverty are reportedly unable to afford healthcare. For example, the percentage of Irish people living in poverty who decided not to attend a doctor due to the cost doubled between 2008 and 2009, according to official numbers.

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Furthermore, being granted a card is no guarantee of good health, as sociodemographic factors continue to dictate stark disparities in health outcomes. Irish men have the lowest life expectancy in the European Union, and Irish women are twice as likely to die of heart disease as their EU neighbours. According to OECD experts, the Fine Gael-Labour governments goal of introducing universal health insurance may go some way towards reducing health inequalities, at the domestic level at least, but it may well fail to address the aforementioned problem of inefficiency. The treatment of people with mental health problems, long a source of controversy in Ireland, has likewise been highlighted as a cause for concern. Though the country has developed a Mental Health Strategy, civil society groups emphasize that this has not been meaningfully implemented. In June 2011, an independent monitoring group appointed to assess progress on the Mental Health Strategy lamented that the rate of advance in specialist mental health services, such as rehabilitation and psychiatric care for older people, had been particularly lacking. Meanwhile, the Traveller Health Strategy, which expired in 2005, has thus far not been replaced, despite the recommendation of the UN Special Rapporteur on Extreme Poverty and Human Rights.215 Furthermore, the outdated National Health Strategy fails to consider access to health facilities and services from a human rights perspective and ignores the crucial principle of non-discrimination, as has been noted by the UN Committee on Economic, Social and Cultural Rights. Against this backdrop, the policy trend of prioritizing cutbacks in social spending over revenue-generating tax increases in efforts to address the economic crisis is likely to seriously undermine the already under- protected right to health. Vulnerable groups such as the Traveller community, asylum seekers and the disabled, who face particular difficulty in accessing health services, are likely to face even greater marginalization as a result.

Class politics: the right to education Irelands efforts to establish its reputation as a leading knowledge economy was one of the hallmarks of the Celtic Tiger years. In addition to the intrinsic value of education in and of itself, the importance of investment in human capital for long-term economic success and 77

sustainability is well documented. One might therefore expect the right to education to be wellprovided for in modern Ireland. Unfortunately however, this area of the countrys socioeconomic life has not escaped the ongoing economic storm. Despite a political discourse that appeared to indicate the contrary, governments during the years of prodigious growth did not demonstrate in budgetary terms their stated commitment to educating the population. Even at the peak of the boom, Ireland invested just 4.7 per cent of GDP in education, ranking 30th out of 33 comparable countries examined by the OECD. The Czech Republic, Slovakia and Italy were the only nations to spend less than Ireland in the rankings. While lower spending levels do not necessarily translate into poorer performance, Irelands low position in the rankings does raise questions over political commitment to the right to education. The OECDs study revealed an education system suffering meagre investment at primary, secondary and tertiary level, along with class sizes that were among the highest in the OECD in 2008. This uncomfortable assessment of Irelands fiscal commitment to education was based on figures from 2007, before the system came under attack from four consecutive years of austerity budgets. Unions and rights groups estimated that the cuts to education in the 2009 budget would cost the average family up to 2,000 per year. Subsequently, the 2010 spending plan saw teachers pay reduced, along with an estimated 134 million removed from the annual spend through cuts including student grants and support for disadvantaged areas. There was to be no let-up in the squeeze, however, as the National Recovery Plan, announced in November 2010, set out plans for a further 690 million in cuts over the following four years. Thus far, the current government has not reversed this trend, with the 132 million reduction announced for 2012 following on from a 170 million cut in 2011. Hikes in student fees, along with further cuts to grants and reductions in the number of teachers, throw serious doubt on Irelands commitment to making education equally accessible and free for all. Immigrant children, who make up 6 per cent of the school age population, have also found themselves particularly affected by the cutbacks. Although the Intercultural Education Strategy 2010-2015, which aims to promote inclusion and integration in the education system, is to be welcomed, cutbacks to extra language resources have hit this group particularly hard. Such potentially regressive measures are all the more worrying given that demographic trends show the number of school-age children in Ireland will increase dramatically in the coming years. Universities have likewise seen their resources severely undermined just as the number 78

of students they must cater to rises fast. The countrys pronounced levels of social inequality will very likely be exacerbated by this decline in financial support for its schools. The independent Think Tank for Action on Social Change (TASC) warns that there is already a marked education premium in the country, with those who receive little schooling struggling to survive on a gross median income of 13,489, while those with university degrees or higher earn a median income of 45,707. Taken together, the efforts to tackle the economic crisis are liable to significantly weaken what is already an underfunded and struggling education system.

Vulnerable sectors at risk Though everyone in Ireland has been affected by the economic meltdown, those who benefitted least from the boom are likely to suffer most now that the Celtic Tiger years are over. Statistics show that children are particularly exposed in the country, with one in five of all Irish children or 185,000 in total deemed to be at risk of poverty by EU-SILC standards. One in every 13 is meanwhile classified as living in consistent poverty meaning that they are forced to go without basic necessities. This situation has understandably been branded a disgrace given that in 2007 Ireland enjoyed the second highest level of GDP per capita in Europe. Rapidly rising levels of deprivation among households with children between 2008 and 2010 would seem to indicate that the wellbeing of Irelands young is deteriorating yet further as the economic quagmire continues. It was against this troubling backdrop that the Fianna Fil government cut child benefit by 10 per month for first and second children, with the reduction rising to 20 for subsequent children, in the 2011 budget. This news followed on from an across the board retrenchment to the tune of 16 the previous year. Payments for first and second children were not touched in the 2012 budget, but hopes that the new administration might reverse earlier cuts were quashed with the confirmation of a further reduction in payments for third and subsequent children. Having been criticized in 2006 by the UN Committee on the Rights of the Child over its failure to incorporate the UN Convention on the Rights of the Child (CRC) into domestic law, and with growing public pressure for better legal protections for children, the 2011 budget allotted funds for a referendum on an appropriate constitutional amendment explicitly enshrining childrens rights. Although the Oireachtas Committee on the Constitutional Amendment on Children affirmed that the wording of the amendment should bring Irelands domestic legal 79

framework into line with its commitments under the CRC, there is some discord as to whether the economic and social rights provisions set out in the Convention will in fact be afforded adequate protection. The decision to replace the early childcare supplement with a free year of pre-school education is to be welcomed, as is the states reiterated commitment to ratifying the Optional Protocol on the Rights of the Child on the sale of children, child prostitution and child pornography. These more heartening legislative developments contrast sharply with the policy and budgetary steps backwards Ireland has taken with regard to childrens rights. The a fore mentioned cuts to child benefit will likely have a similarly disproportionate impact on women, who are the primary carers of an overwhelming majority of the countrys children and who likewise account for most lone-parent households. The One Parent Family Payment has been the target of successive cuts, despite the fact that single-parent households suffer the highest consistent poverty rate of any household category. Maternity leave benefit has likewise been subjected to successive reductions. An across the board 8 cut in 2011 followed on from measures in the 2010 budget that saw 10 removed from the maximum rate and 4.50 from the lower rate. There is also concern that provisions for maternal and reproductive health are being undermined. The Irish Family Planning Association reports that funding cuts have impaired its capacity to deliver crucial services, particularly in disadvantaged areas, while increasing numbers of women are finding themselves unable to afford sexual and reproductive health services. Meanwhile, severe reductions to both salaries and staff numbers in public services, where a large share of working women are employed, mean Irish women are again bearing the costs of the crisis in this arena. Even before the recession took hold, women were more at risk of poverty. In 2008, some 17 per cent of women received incomes that placed them below the poverty line, while consistent poverty among female-headed households was twice as pervasive as it was among male-headed households. Levels of deprivation (defined as enforced exclusion from two or more basic indicators considered the norm among others in society) suffered by women rose from 17.7 per cent in 2009 to 23.4 per cent in 2010. The exorbitant cost of childcare in Ireland, which acts as a tremendous obstacle to female participation in the workforce, further contributes to this sectors marginalization. Nevertheless, international suggestions that the Irish government implement a gendertargeted income tax reduction of 5 per cent, with the dual aim of reducing inequality and boosting growth, fell on deaf ears. Further, the government has dramatically reduced budgetary support for womens advancement since the crisis began. The National Womens 80

Strategy has lost the bulk of its funding since 2008, and some 10 million in European Union funding for gender equality measures has been redirected to other labour market programs. Having long been subject to discrimination in all spheres of social and economic life, the Traveller communitys economic and social rights are particularly precarious. On average, Traveller men live 15 years less than their counterparts in the wider population. Three out of 10 adults in this sector, which numbers approximately 40,000 in Ireland, meanwhile have literacy problems, while a substantial minority do not progress beyond primary education. Barriers to access to education, housing, and employment, along with widespread discrimination and poverty, fuel the desperate circumstances confronting this community. According to some indicators the health status of Irish Travellers showed little or no improvement during the Celtic Tiger years. Societal and judicial antipathy with regard to Travellers nomadic lifestyle means that their right to culturally adequate housing has gone unrecognized, as halting site facilities are frequently substandard and the courts are less than sympathetic to those who choose to stop on alternative sites of their own choosing. The right to education is likewise undermined by de jure and de facto discrimination in the school system, which may be further exacerbated by recent cuts to educational supports provided to Traveller children. Although Ireland accepted calls at the Universal Periodic Review to address the inequalities facing Travellers in the spheres of health, education and housing, there is a pressing need to improve the voice and representation of this sector in order to confront the structural determinants of their marginalization. In its most recent review of Ireland, the UN Committee for the Elimination of Racial Discrimination (CERD) criticized the country for its persistent refusal to recognize Travellers as an ethnic group, and noted that its previous recommendations concerning Travellers participation in public life had been ignored, thereby hindering their access to justice with regard to the entire spectrum of rights. People with disabilities have likewise been negatively affected by recent budgets. This group has experienced a long history of mistreatment at the hands of the Irish state, which has yet to ratify the UN Convention on the Rights of Persons with Disabilities. Irelands disabled population was severely affected by both the 2010, 2011 and 2012 budgets, with successive cuts to the disability allowance. The 2012 spending plan sees the allowance paid to people with disabilities aged 18 to 21 reduced from 752 to 400 a month, though this measure has been put on hold pending a review by the Commission on Taxation and Welfare. The disablement pension has also been slashed, along with the carers allowance, thus creating a situation in which many disabled persons may be effectively imprisoned in their own homes. 81

Needless to say, those with disabilities have also been disproportionately affected by the aforementioned cuts to education services, such as student support grants and teacher support services, which have been subject to successive reductions. Civil societys capacity to respond in the face of regressive policy measures has simultaneously been weakened by drastic reductions in state support to the voluntary sector, with a recent Disability Federation survey finding over three quarters of member organizations had been either significantly or very significantly hit by the recession. Although such cuts affect other groups as well, it must be underlined that people with disabilities are particularly reliant on the support of the voluntary sector. Meanwhile, Irelands disabled population continues to wait for the governing coalition to publish an implementation plan for the National Disability Strategy, as promised in its Program for Government. Concern over the wellbeing of Irelands older persons is likewise rising, with the majority of this sector living on incomes that are close to the poverty line. Poverty levels among older persons fell dramatically under the Celtic Tiger, with the proportion considered at risk of poverty dropping from 44.1 per cent in 2001 to 9.6 per cent in 2009. Though the state pension has not been cut as severely as other areas of social spending, recent austeritydriven cuts in welfare payments, along with reductions in public sector pensions and the scrapping of Christmas bonus payments could easily reverse this trend. Data from the Central Statistics Office confirms that when social transfers are excluded, the proportion of over-65s deemed to be at risk of poverty rises from 10 per cent to 88 per cent. Cuts to health services and rising heating costs affect older persons disproportionately as well. In this regard, the decision in Budget 2012 to reduce the duration of winter fuel allowance payments from 32 to 26 weeks is particularly regrettable. The charity Alone, which provides support to marginalized older people, has reported a 50 per cent surge in demand for its services in 2010, as older persons suffering debt, poverty, sub- standard housing conditions, physical illhealth and or disability and mental health issues struggle to make ends meet on reduced state payments. The UN Special Rapporteur on Extreme Poverty and Human Rights has meanwhile voiced concern over plans to reduce pension payments while also raising the retirement age to 66 in 2014 (with the eventual goal of raising it to 68). Increasing the age at which older people qualify for pensions represents a reduction in social transfers to a sector that is heavily dependent on such payments and, as such, a potential threat to their right to an adequate standard of living Immigrants and asylum seekers are also among those afforded least protection by the state. The delays in processing asylum applications have long been a cause for concern in Ireland, with upwards of 6,000 migrants detained in direct 82

provision accommodation sites, often for years on end. It is unsurprising, therefore, that a cut in the Irish Naturalization and Immigration Services budget by 21 per cent in 2011 provoked great concern among rights groups. Resource allocations for asylum seekers accommodation, which is already acutely substandard, was meanwhile reduced by 13 percent when 10 million was removed from the Reception and Integration Agency budget. The weekly allowance of 19 paid to asylum seekers, who are not allowed to enter the workforce and cannot access primary social welfare payments, has not risen in over a decade. Furthermore, the fact that a small number of Irish businesses such as private hostel owners are making substantial profits from the current asylum system, has led some to question who the real beneficiaries are. Other immigrants, though not subjected to the same levels of mistreatment as asylum seekers, are likewise denied basic rights. Those who do not qualify for work visas are particularly vulnerable to exploitation, and their situation is likely to be worsening as competition for low-paid jobs increases. Concerns have also been raised that those immigrants who can access social welfare payments, and thus remain in their adopted homeland, are being used as scapegoats to justify regressive social protection policies. At its recent appearance before the Universal Periodic Review, Ireland rejected calls to ratify the International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families.

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9.0

Aftermath

The republic of Irelands unprecedented economic expansion between 1995 and 2007 was widely viewed with wonder and celebrated by the advocates of neoliberalism as a model for other developing countries. According to McCann, during this period of unprecedented growth southern Ireland went very quickly from being one of the least developed regions in the European Union, in constant need of structural funding, to being statistically on par with Japan and the United States in per capita GDP terms. All of this came to a halt beginning in 2007. As the shockwaves of Wall Streets meltdown spread out from New York City harbor and east across the Atlantic, capital inflows to Ireland abruptly ended, American corporations vanished, and property prices collapsed. The Irish government bailed out Irish banks with taxpayer savings. In exchange for loans to cover massive debt, the Irish government invited the International Monetary Fund, the European Commission, and the European Central Bank to Dublin to determine austerity measures and future economic policy. Unemployment rocketed, migration reversed, and austerity policies cut social services to the bone. What created the boom and the bust? McCann argues that the neoliberal method of forcing a society into an artificial, eminently destructive economic process should be seen as not new to Irish history. Its patterns of development have been familiar, involving land deals, corrupt politicians, cronyism, monopolies, financial scandals that has placed profit for a few above the needs of the rest. The disastrous outcomes have been similar across a number of moments in Irish economic history. McCann aims is to explore the contention that the political economy of the island of Ireland and its dominant ideological formemanating from classical liberalism through to neoliberalismhas been a, if not the, cause of this turbulent history. Secondly, McCann contends, the Irish economy has to be analyzed not as two distinct entities, as it has in the past by most commentators, but in a way that takes into account the interactive nature of these border economies. The book covers an expansive historical period making it ambitious. Chapters are arranged to look at sequences in Irelands economic development beginning with the colonial economy, famine and leading on to industrialization and militarization, partition,

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the war economies, the modernization process, the conflict economy, the role of the border, peace and reconciliation, neoliberal Ireland and the recession. By the time of the outbreak of the 1845 Famine there were more troops stationed in Ireland than imperial India; one British soldier for every 80 Irish people. The role of the military was straightforwardcontrolling the population, repressing resistance and assisting in the extraction of whatever was commercially viable.(Harkin, n.d.) English dominance, increasing commercialism, land marketization, landlordism, and tenant evictions generated growing dissent and led to increasingly bitter struggles over access to land. While Irish society remained convulsed and traumatized by the Famine, market penetration, agricultural modernization, and industrialization continued apace but in a very uneven way, creating the future regional economic divergences that would shape Irish politics to the present. The north industrialized at an unprecedented speed between 1850 and 1890, but southern Ireland struggled to maintain its manufacturing base. McCann writes, The economy of the north-east had survived the worst years of the famine and, with its proximity to Glasgow, Liverpool, and Manchester had been able to create an industrial based around linen and rope production, tobacco packaging, and eventually shipbuilding. Home Rule was defeated in 1886, but Irish nationalism grew stronger and proliferated throughout every aspect of society on the back of emerging Catholic middleclass landownership. Irish Parliamentary Party leader John Redmond recruited Irish volunteers to fight for Britain during the war; ultimately some two hundred thousand Irishmen fought on the side of the Allied powers. Redmond believed Irish blood sacrificed for the British war effort would demonstrate loyalty to the empire and guarantee political support in Westminster for passage of and implementation of a new Home Rule bill. Redmond favored Home Rule over support for a republic because he calculated the link with Britain was crucial for Irelands economic development. Aspirations that revolution would give birth to a new Ireland were dashed early on. A brutal civil war followed the signing of the treaty with Britain. The states governing regime would be procapitalist and allow Catholic conservatism to smother the country. The economy stumbled into the 1930s in such a weak position that the global depression had only a marginal impact on employment.

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The new, and highly sectarian, Northern Ireland statelet, according to McCann, was organically tied to the ebbs and flows of the British economy. Financial, fiscal, and monetary policies were shaped through the Treasury in London, yet the North was cut from a national economic hinterland in the Free State. It was to be the only region in the United Kingdom to have a border economy to deal with, and all the dislocation that this came to represent. In the peace process era the power-sharing northern administration sought to mimic the neoliberal model in the south and to play off the perceived successes of the Celtic Tiger. However, a number of factors meant the boom could make only limited inroads in the north. Firstly, the Republic had a corporate tax rate of 12 per cent, whereas it was 28 per cent for Britain including the North. Secondly, decades of war and political instability meant the North was viewed as a less than ideal location for multinational corporations. Included in the Northern Ireland peace framework are multiple areas where there can be economic cooperation across the border. McCann appears optimistic that this development process can lead to economic revitalization of the country as a whole and especially border areas affected disproportionately because of partition. Theres no doubt this could be a positive development, but in an era of neoliberal austerity this isnt an automatic outcome; cross border cooperation can become a tool for rationalization, privatization, lay-offs, and wage-cuts. McCann argues that an alternative to market fundamentalism is needed, one that includes social justice. The content of this alternative and how to create it is left incredibly vague, however. McCann rejects neoliberal globalization but not necessarily capitalism in its entirety. Oddly, he makes the case that the state visit by Queen Elizabeth II to the Republic of Ireland in 2011 offered an insight into the potential peace building between the islands and within Ireland itself. It goes without saying that the British monarchy is an antiquated institution, but it continues to play an important role in maintaining the status quo for the ruling class. The British Empire, for the most part, is long gone, but Britain is still a neoliberal imperial power and the Queen its titular head. Rather than the potential for peace this visit represents neoliberal normalization.

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This is an extremely useful book and a very important contribution. McCann effectively demonstrates how economic frameworks and political decisions pursued by elites over the past two hundred years, be they in Brussels, London, Dublin or Belfast, have had an adverse impact on the vast majority of people on either side of the Irish border. Within the study of Irish economic history, and Irish history more generally, Irelands Economic History can help to challenge an orthodoxy that attempts to reduce the impact of colonialism, naturalize for-profit economics, and continues to promote policies benefiting the rich and powerful. In his fascinating study of Irish economic, social and political history Coakley aims to explore Irelands position in the formation of the modern world order and why it developed unevenly, and differently from neighboring England, Scotland, and Wales. He argues that the dominant currents within Irish historical studies avoided any exploration of the structural relationship between Ireland and Britain as a matter of methodological principle. Notions of colonialism were considered redundant. In this framework, British governance in Ireland is viewed as a civilizing force and Irish resistance narrow, primitive and atavistic. The industrial revolution motored Britain into the position of the preeminent global power in the nineteenth century. Irelands failure to industrialize was viewed as evidence of innate backwardness and the hold of mystical Catholicism. The northeast of Ireland, particularly around Belfast, industrialized, but the region had a Protestant majority so reinforced the notion of Catholic inferiority. Coakley argues, to the contrary of these arguments, that colonialism is key to understanding Irelands economic development. It was Marxs study of Ireland, he writes, which led him to doubt earlier optimism of the impact of capitalist expansion. For Coakley, underdevelopment is the collateral damage of capitalist expansion. Utilizing the insights of Denis OHearn, Coakley contends trade and manufacturing restrictions imposed by England on Ireland in the context of an Atlantic economy are a critical factor in shaping its economic development. He also attempts to integrate Robert Brenners theoretical framework of agrarian capitalist development, but in reverse. The dynamic of Englands industrialization led to increasingly commercialized and market-oriented agriculture in Ireland and Scotland. In the 1760s agrarian resistance movements spread across the most commercially developed areas of Ireland. Colonial rule

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blocked the development of a social layer of tenant farmers who could collaborate with landlords in advancing production. Anglo-Irish landlords faced intense loathing from the Irish Catholic countryside, except in the northeast of the island, where the Ulster Custom between Protestant tenants and landowners had an impact on the regions industrialization. Trade restrictions, followed by free trade imposed by the English Parliament caused de-industrialization in the nineteenth century of Irelands already weak industrial base. It was not so much that Ireland developed more slowly than England in the early modern era, writes Coakley. Actually, Ireland developed very rapidly in the early modern era as evidenced by the growth of markets, exports, and population. It was that this growth was of a hugely destructive character, resulting in extreme degrees of poverty, misery and ultimately famine, a phenomenon that would become known as underdevelopment. Britains global dominance was fundamentally challenged in the Great War. Death in the trenches destroyed the authority of British rule, and rebellion swept across Ireland. Coakley argues that the crucial significance of Irish independence, for all its limitations and hesitations, is that it began the breakup of the British Empire. At the same time, the social and economic policies of the new Irish Free State differed little from the era of British rule. Ireland continued to be dominated by the British market, where 90 per cent of Irish goods were exported. Today, in the ongoing aftermath of the 2008 crisis, both the Northern Irish and the Republic of Ireland states are imposing austerity largely at the dictate of external powers. Coakley calls this a new neo-imperial phase of Irish history that Irish elites are fully complicit in. Instead of austerity, Coakley calls for the repudiation of bankers debt as an alternative to structural adjustment and the destruction of public services. If resistance for different social priorities and a reorganized Europe does not emerge, Coakley is correct to argue that a dystopian future awaits Ireland. In their detailed study of Irish political institutions, how the boom was managed, and a comparative analysis of Irelands role in the world economy, Kirby and Murphy argue the Celtic Tiger, despite the hype, failed to solve Irelands long-standing development problems. The crisis and what it has exposed demonstrates the Malaise at the heart of the Irish project of Independence. 88

Irelands political system is deeply dysfunctional, with golden circles of political, economic, and social elites enmeshed in a culture of corruption. According to a 2007 Bank of Ireland wealth report 5 per cent of the population owned two-thirds of Irish wealth. Kirby and Murphy argue that while the international banking crisis triggered the Irish economic crisis, the deeper causes were very much home grown. An indigenous Irish elite overlaps with an international elite. For the boom to occur, Ireland had to contort itself into an extension of the US economy and adapt itself to the needs of global corporations. US corporations such as Google and Microsoft were notorious for using Ireland to evade paying taxes and US pharmaceutical companies used transfer-pricing to increase profits from 5 percent to up to 50 percent. The state-led pursuit of multinationals from the 1960s on weakened the trade union movement. Dissent was coopted and managed through a social partnership agreement that became embedded in the late 1980s along with austerity. To understand modern Ireland, Kirby and Murphy contend, the phenomenon of Fianna Fil (Soldiers of Destiny), the Republican Party must be understood. Fianna Fil formed as a political party in 1926 after refusing to accept the treaty with Britain that partitioned Ireland and denied full republic status. After first coming to power in 1932, Fianna Fil then went on to dominate Irish politics for the next seventy years. Fianna Fil viewed itself not simply as a political party but as a national movement. The failure of labor to present itself as a viable alternative in the early years of the new Irish state allowed populist nationalist parties to win the allegiance of working-class voters. The authors argue Fianna Fil can be viewed as similar to the Congress party in India, the PRI in Mexico, the Christian Democrats in Italy and the LDP in Japan, all of which have in common centrist policies and patron-client relations. The permanence of Fianna Fil in power allowed a conservative Irish state bureaucracy and civil service to develop as a permanent government with immunity for high-level civil servants. In Irelands transition from British rule during 192122 to the Irish Free State, over 98 percent of the over twenty thousand members of the Irish civil servants retained their posts. Gender inequality, Kirby and Murphy argue, is deeply embedded in Irish society and political institutions, and reflected in the fact that Ireland was ranked by the UN as seventyeighth in the world for female representation in parliament. In 2006 womens average hourly wage was 86 percent of mens. In assessing the losers in the aftermath of the Celtic Tiger, 89

they write: Lone-parent households are the most at risk of poverty, with a rate of 36.4 percent. It is the cross-cutting nature of disadvantage that really impacts on womens inequality. The intersection of gender inequality with other areas of discrimination renders a double disadvantage for women Travelers, women migrant, women with disabilities, and women who are homeless. Meanwhile the winners are drowning in champagne. The Celtic Tiger and the globalization of the Irish economy also had a tremendously detrimental ecological impact: Irelands greenhouse emissions had increased steadily from 55.5 million tons to 70.7 million between 1999 and 2001. The authors describe in detail the various aspects of the Northern Ireland peace agreement that was overwhelming supported in a referendum held on either side of the border in 1998. The economic peace dividend, however, did not occur, and though they acknowledge further integration between North and South is possible, they contend that the sectarian logic of the consociational institutions has the potential to institutionalize divisions. In the 2011 national elections Fianna Fil suffered a devastating and humiliating political defeat. However, the coalition government made up of Fine Gael and the minority Labour Party has continued with austerity and in pursuing a neoliberal development strategy. To point a way forward towards a new republic, Kirby and Murphy document the role and potential of left-wing parties and of social movements. They appear surprisingly confident in the notion that if the government coalition of 19941997 had been reelected in 1997, market regulation, social investment, and social equality would have been pursued. Furthermore, they argue, the 2007 collapse could have been avoided. They dont grapple with the impact decades of social partnership have had on the capacity of trade unions and the broader working class to struggle effectively. In determining the content of a new republic, the authors favor the development of an ecological or ethical socialist model, but argue that unfortunately this model is not likely to win majority support. This is an extremely useful contribution to the wide discussion about the future of Ireland and the need for root and branch transformation. However, the academic character

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of the book leads to a lack of precision when discussing alternatives and how they can be achieved.

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