How Successful Have the Irish Government and the European Central Bank Been in Running the Irish Economy over the Last Two Years?

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Economics for Global Business

How successful have the Irish Government and the European Central Bank been in running the Irish economy over the last two years?

The economic system of the Republic of Ireland is a modern, relatively small, trade-dependent economy, whose growth for 1995-2000 has averaged 10%. The agricultural sector, which once played a dominant role in the system, now replaced by the industry, the industrial sector accounts for 46% of GDP, about 80% of exports, and 29% of the labour force.

Public Finances 2004-2014

(4)

Although the main engine of economic growth of Ireland is export, consumer spending, recovery of construction and business investment also contributes to the development (1). The annual inflation rate for the August 2012 was 2.6%, up from the recent mark in July, which was 2%. One of the problems in the economy is inflation in property prices (the average price of residential homes in February 2005 was about 251 thousand euros). The unemployment rate is very low and the income is characterized by rapid growth, with the price of services (utilities, insurance, healthcare, legal, etc.) (5).

Dublin, capital of Ireland, was in 16th place in the world ranking in terms of cost of living in 2006 (up from 22th place in 2004 and 24 seats in 2003) (3). There were reports that Ireland has the second largest average per capita income of all the EU countries after the Luxembourg and in the world takes the 4th place on this indicator. Has become the second country in the European Union after Greece, which has applied for financial assistance from the IMF and the ECB (2).

The global economic crisis has hit the Irish economy in 2008 and continues to affect the Irish economy by creating many domestic economic problems, particularly the collapse of the real estate bubble (1). Ireland was the first country in the EU, which officially recognized the beginning of the recession, as declared Central Statistical Office of Ireland. Institute of Economic and Social Research ESRI recently predicted that the Irish economy will stagnate at least until 2011 (1).  Ireland has the highest level of mortgage debt relative to disposable income in all "developed world". Emigration is estimated at 1,000 people per week in 2010, even worse than in 1989.

Ireland joined the euro zone January the 1st, 2002. GDP growth averaged 6% in 1995-2007, but economic activity dropped sharply in 2008-2009, as GDP fell by 3% in 2008 and nearly 8% in 2009.

Before the crisis Ireland was awarded third place in the world for "economic freedom" in the index, created by economists and supporters (as they are called) "free market," the Wall Street Journal and the Heritage Foundation, called the Index of Economic Freedom. Despite the titles of the Republic of Ireland became the first country in the EU, which officially went into recession as declared the Central Statistical Office. Country's credit rating was downgraded Standard & Poor `s to "AA" in August 2010 due to the cost of supporting the banks, it was found that the cost of recapitalization of banks was more than expected by the government first, and, in response to rising costs, the credit rating of the country was again lowered to AA. Global recession significantly affected the Irish economy. Economic growth which stood at 4.7% in 2007, fell to -1.7% in 2008 and to -7.1% in 2009. Ireland officially came out of recession in 2010, after the symbolic growth of 0.3% in Q4 2009 and growth of 2.7% in Q1 2010. However, the economy again experienced "negative growth" in Q2 2010 - 1.2%.

The question arose because of the solvency of internal problems in the Irish property market where they formed a giant bubble and burst. Irish financial institutions have an important place in their portfolio of loans held builders. These developers are currently suffering from significant oversupply of property; it is still unsold, while the demand for housing is...
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