Why Ireland is not Greece
The Irish government and policymakers in Brussels – in particular the European Commission – will hope today’s positive growth figures from Dublin can finally convince the markets and the media that the Emerald Isle is not in the same sinking boat as Greece, nor is it comparable with Portugal, Italy or Spain.
“Ireland is not Greece” has become a well-rehearsed catchphrase for Irish ministers, Members of the European Parliament and even EU Commission President Jose Manuel Barroso. But until now, traders and journalists alike have continued to lump Ireland into the same basket case, otherwise known as PIIGS. (A source tells me that the BBC’s economics and business editors sent an email last week asking if Ireland should be taken out of this acronym given its potential for growth).
In a week when thousands of Greeks are expected to take to the streets of Athens once again over further austerity measures and a growing chorus of investors predicting a default, and Italy’s downgrading, official figures show that the Irish economy – measured by gross domestic product – grew by 1.6% in the second quarter of this year. Even more importantly using gross national product, which strips out the contribution of foreign multi-nationals, the economy grew by 1.1%. The figures also indicate a stabilisation of domestic demand as well as continuing export growth in the period from April to June — going some way to easing tensions with Paris and Berlin over Ireland’s highly competitive corporate tax rate which has been the driving force behind Ireland’s success at attracting large foreign direct investment.
Ireland’s good news will dump further misery on Greece, and it may also serve to remind the markets and policymakers once again about the underlying reason why the Eurozone crisis started in the first place – Athens cooked the books and basically committed fiscal fraud.
Ireland may have been greedy, stupid and bet too heavily on the property market, but it never lied. Portugal didn’t lie either, but it just couldn’t generate growth or investment and it’s public sector was draining its lifeblood (again unlike Ireland which has continued to attract the big multilaterals, grow its manufacturing and exports). Italy sort of falls somewhere between the naughty Greeks, excessive Irish and socially-reliant Portuguese. But like Greece, there are commentators, policymakers and politicians who question whether the Italians were completely honest about the state of their economy when they joined the now 17-nation Eurozone ? Like Greece, maybe the champions of the currency rushed to quickly to allow Silvio and co. join the Euro club. Only time will tell.