Irish economy in uncharted territory

Now, at the dawn of 2009, Ireland is set to experience for the first time the full forces of the boom and bust cycle long familiar to Americans.
It’s no surprise then that Taoiseach Brian Cowen has been painting a stark picture of the Irish economy’s prospects over the next twelve months.
In an interview on Irish radio last week, Cowen spoke of a “fundamental fracture” in the world’s financial system.
And he predicted that what lay ahead was “a few years where the standard of living will drop.”
“We have a problem. It is a serious problem. Unemployment will go up in the short term, that’s for sure. We’re going to take some pretty tough decisions in addition to the ones we have already embarked upon. Our tax revenues are well down,” Cowen said.
“The bottom line is we’re spending more than we’re earning. We’re down eight billion on our tax receipts this year. Next year is going to be difficult as well,” he added.
Still, he said, even harder times could turn out to be better than hard times in years gone by.
“After 10 or 12 good years, when one year was better than the next, for most people, we are now going to face into a few years where the standard of living is going to drop. But it is going to drop back to a level which is still well ahead of where it was five, 10 or 15 years ago,” the taoiseach said.
Cowen stated that his government was looking to alternative plans if as many 2,000 jobs are lost in the new years at the Dell computer plant in Limerick.
The Irish Times reported that Dell is due to make a decision in January on the future of its Irish-based manufacturing as part of a rationalization of its worldwide operations.
“It is understood Dell wants to relocate the bulk of its factory-floor activities to eastern Europe and Asia,” the Times report said.
“We have put a business case to try to build on what will be part of the Dell operation in Ireland, whatever decisions they come to on the manufacturing side,” Cowen said in his radio interview.
Tanaiste Mary Coughlan and Irish defense minister Willie O’Dea, who is a TD from Limerick, recently flew to Texas to meet Dell founder, Michael Dell, in an effort to save the threatened jobs.
Meanwhile, the governor of Ireland’s Central Bank, John Hurley, has predicted that the Irish economy could contract by up to four percent next year and that unemployment will rise significantly.
He said in an interview that the decision by the government to recapitalize the banks was a difficult one, but necessary to stabilize and restore confidence to Ireland’s banking system.
According to an RTE report, Hurley said Ireland was facing into the worst financial crisis for more than a century and it was not known how long it would last.