Ireland's Economic Crisis 2008

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IRELAND AND ITS ECONOMIC CRISIS

Ireland is an independet republic with parliamentary system since 1919.For a generation after Ireland achieved independence from the United Kingdom in 1922 it started being economically self-sufficient.Ireland´s first economy primary relied on agriculture,exports to the U.K. market and manufactures.Thanks to trade barries such as high Tariffs ,make its economy successful during this first period.

Some relevant periods in the irish economy should be considered before analizing other data, the following periods are explained by Antoin E. Murphy in his article The “ Celtic Tiger”- An Analysis of Ireland´s Economic Groxth Performace ( EUI working papers) :

During 1932-38 it was the era of protectionism.In this period there was an economic war with the U.K and a attempt to bild infant industries behind higa tariff walls.The Control of Manufactures Acts were introducs prohibiting the ownership of Irish industry by foreigners. Then,between 1939-45 the Worl War II took place during wich Ireland remained neutral. Afterwards, among 1946-57 it was the period of economic stagnation marked by heavy emigration-net emigration averng over 40,000 during the 1950s. Later and continuing with ireland´s economic growth in 1957 was the year in which occurred the removal of the Control of Manufactures activity.

Morever,in 1970 for the first time after the independence,the Irish population increased by 15 % for a decade.This first growth in population was accompanied by a national increase in income and contrary to the previous decades by a decrease in unemployment.According to Sean Dorgan an expert on the topic “ The 1970s also saw a rapid expansion in public (state) expenditure on social welfare, health and education, housing, telecommunications and other infrastructure, and administrative services. Public-sector employment represented a third of the total workforce by 1980” .

All the data mentioned above happened during a period of high inflation,which according to Sean Dorgan “ averaged 13.6 percent per year from 1971 to 1980” and it was partly caused by the oil crises,domesctic trade and an expansionary fiscal policy.Besides,public budget shortcoming and high public borrowing were come relevant characteristics of the latter years,originating the basis for the recession that appeared in the 1980s.

As regard Ireland´s economic developments, Ireland joined the European Economic Community (EEC) in 1973.After this union,it went from being one of the poorest country in the group to be among the country with the highest per-capita incomes in the community.This phenomenon took place in the late 1980s and is known worldwide as the “ Celtic tiger ”. This boom was characterized mainly by sustained growth in employment,income and construction.The boom in construction boom was financed by Irish banks which in turn where financed by other external financial markets.

Besides,the entry of Ireland to the European Union caused that many foreign companies start setting their businesses in the country.These companies favored the begining of a new era where business had free access to a larger market,and exports could be focused away,not only on the U.K. During this growing period the government introduce a new banking model named “ originate to distribute” that allowed banks to make loans and do not need to hold them because they were lent by other financial insitutions.This new model resulted in an unprecedent increasement in the liquidity of banks.

Furthermore, the agricultural sector also benefited out after the junction to the EEC due to the EEC´s Common Agricultural Policy which promotes access to wider markets and as a result improved Ireland´s living standards.So, in other words, in a short period Ireland ceased to be one the poorest countries in Western Europe to become among one of the most successful.Succesful economic policies and important fiscal consolidation measures helped Ireland...
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