The spectacular flameout of the Irish economy has caused massive upheaval in the country – impacting everything from job opportunities to the housing market to its political leadership.
Prof. Gary Murphy of Dublin City University, one of UMass Lowell’s partner universities, visited campus March 8 to deliver a talk outlining how that upheaval and subsequent bailout by the International Monetary Fund (IMF) and European Union (EU) have transformed Ireland’s economic and political landscape.
“Ireland is a country in receivership,” said Murphy, who is currently a visiting Fulbright Scholar at the University of North Carolina at Chapel Hill. Murphy’s campus visit was sponsored by the UMass Lowell’s Center for Irish Partnerships
From 1995 to 2007, Ireland had one of the fastest-growing economies in Europe, earning it the handle “Celtic Tiger.” Fueled by massive amounts of direct foreign investment, relatively low corporate taxes, easy credit and other factors, employment soared, the housing market boomed and disposable income swelled. However, that came to a halt in 2008. Similar to events in the United States, the deflation of the housing bubble had particularly catastrophic effects.
“It was lunacy. Housing prices were ludicrously overvalued and regulators had taken their eyes off the ball,” Murphy said.
As income and tax revenues flat-lined in Ireland, government spending was slashed. Salaries for public employees were trimmed and pensions and benefits pared back. Finally, in 2010, the Irish government sought a controversial 85 billion euro ($121 billion) bailout from the IMF and EU. As a condition of the bailout, the country has to adhere to a strict fiscal regime.
The economic turmoil also led to turnover in the country’s political leadership. Fianna Fail, the country’s dominant political party, was ousted in 2011, replaced by a coalition of the Fine Gael and Labour parties. “Fianna Fail was the most successful political party in Western Europe. It was in power for 60 out of its 84 years in existence,” Murphy said. “That collapse in 2011 was a political tsunami. It changed a century of Irish political culture.”
With government austerity programs still in effect and the private sector still struggling to regain its footing, the prospects for a sustained economic recovery are uncertain. “People are afraid to spend. That could undermine a recovery,” Murphy said.