Ireland and Structural Funds

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Sarajevo Scool of Science and Technology

CASE STUDY

Ireland and Structural Funds

Student: Arijana Lajlani
Content

1. Introduction……………………………………………………………………….…….3 2. Background……………………………………………………………………………..4 3. EU Structural Funds……………………………………………………………………7 4. Ireland and the EU Structural Funds……………………………………………………9 4.1.The National Development plan 2007-2013……………………………………….10 5. Conclusion…………………………………………………………………………….12 6. Literature………………………………………………………………………………13

1. Introduction

The theme of this case study is the role that EU Structural Funds have played in Ireland’s success story. Ireland was a “poor” country compared to the European Union average however, in the last decade the economic growth, low inflation, falling unemployment and budget surplus have shown that Ireland can in no way be described as a “poor” country any longer. Since joining the EU in 1973, Ireland received nearly 17 billion Euro in EU Structural and Cohesion Funds support. The Structural Funds contributet by increasing the net capital inflow into the economy and co-financed measures for regional development, infrastructure, and human resource development. As the Second Cohesion Report has shown “Ireland is an example of “good practice” of the first order and demonstrates what can be achieved if Structural Funds assistence is integrated into a coherent policy which, in particular, maintains healthy macroeconomic conditions and which is supported by social consensus.”[1] Whether or not Structural Funds alone or alongside other factors caused such a successful story for Ireland is also an important question to be raised.

2. Background

“The Celtic Tiger” is a colloquial term used to describe the fast growth of Ireland’s economy. The term refers to the East Asian Tigers- South Korea, Singapore, Hong Kong and Taiwan during the periods of their rapid growth in the 1980s and 1990s. The question that has been raised by many is how a country can make such an incredible transformation at the speed that Ireland has. Europeanisation has been key in the transformation of the Irish economy. It began in 1973 when Ireland joined the European Economic Community. In 1978 Ireland commited itself to joning the exchange rate mechanism of the European Monetary Union. This decision represented an important step in the orientation of the Irish economy. Ireland was turning to the Continental European countries an reducing its dependancy on the U.K. Ireland was nevertheless heading towards a growing macroeconomic crisis and the failure of the macroeconomic policy to adress the situation may be seen by the absence of economic growth between 1982-1986. 1987 was a crucial year in Ireland’s recent economic history. In 1987 Ireland was a poor, struggling economy, unemployment reached 18% of the labour force and national debt amounted to 125% of GNP. However, changes started in the same year, the year 1987 is the year when a policy of fiscal retrenchment was introduced. For once in the country’s history there was a consensus on the appropriate economic policy to follow. Apart from Europeanisation, at the same time globalisation had significant impact on Ireland’s economy. In the new high-tech age, US multi-national companies needed to have a European base from which they could sell their products. The creation of the Single European Market in 1992 increased this need. By the early 1990s Ireland was well positioned to atract these US companies. The companies were atracted primarily by very low corporate tax rates. They amounted 10% on manufacturing profits and internationally traded service profits. Ireland was able to offere these low tax rates because of the absence of an established industrial sector already paying corporate taxes. Ireland’s lack of industrialisation then became a positive factor which made it possible for Ireland...
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