As a result of all this growth is starting to re-emerge, even though domestic demand is still contracting. As expansion accelerates, it will generate jobs only slowly. But with the speed and slope of correction in competitiveness that is under way, the feed-through to domestic demand and job creation will come. And over the next few years a socially more sustainable balance to the recovery will also end up swelling the tax base more strongly than the present pattern of export-led growth. For the pressured taxpayer, there is a glimmer at the end of the tunnel.
We are highly conscious of the contagion risks posed to Ireland by further bond market or banking shocks elsewhere in the eurozone, or by any setback in world trade. And no one can ignore the political challenge of keeping Ireland ahead of the Troika's targets. It also has to be stressed that we are assuming firm persistence in the course of fiscal consolidation. This said, we do believe that Ireland's macroeconomic fundamentals provide the most important defence there can be against all forms of shock.
Eoin Treacy's view At a London Chart Seminar in 2006 I remember a conversation with an Irish delegate
who had just sold part of his farm to a real estate developer and was looking
to invest the proceeds. He recounted how the money he made from the sale would
be enough to keep him and his family in comfort for the rest of his life. At
the time he was making less than the average industrial wage (circa €34,000)
from farming. At the time property prices were sky high and farmers had yet
to experience the benefits of a secular bull market.
Since then the property bubble has burst. The banks are all broke with only Bank of Ireland avoiding bankruptcy. (In the interests of full disclosure, I currently have a couple of small spread-bet long positions in the share.) Wages have contracted everywhere with farming just about the only sector to see income growth. The economy has contracted violently, 'forced' emigration is again a reality for another generation of young people and sentiment is at an extremely low ebb.
I have observed something of a return to type for many people. Contradiction has always been a facet of Irish life. We are known equally for fatalism and a devil-may care attitude. Complaining about how bad the economy is and vainly hoping for the weather to improve were always comfortable characteristics which were forgotten during the bubble years. However, this pessimism is to ignore the very real strengths of the Irish economy.
Exports hit a record in June and the country runs an impressive trade surplus. Irish farming currently produces enough food to feed more than 30 million people and hopes to increase that amount to 50 million in the next decades. Ireland is still home to the European headquarters of a large proportion of Silicon Valley's elite companies. The road to recovery will be long and it will not be easy. Further fiscal sacrifices will need to be made. However recovery is a much more likely prospect that many assume led by high tech manufacturing and agriculture.