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Mon. December 04, 2023
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Refinding the Rainbow
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Refinding the Rainbow By Atsuko Matsumoto TOKYO -- Cranes stretching across the Irish sky were once symbols of the Celtic Tiger, with the period of rapid economic growth that began in the mid-1990s transforming the country from one of the poorest, to one of the wealthiest nations in Europe. But that same sky is now getting grayer. Despite having enjoyed positive changes in their economy and lifestyle, most Irish probably knew the miracle could not last forever. But what they were not prepared for was the massive wave of the global financial crisis, triggered by the United States subprime crisis late last year. This year started on an even gloomier note, with the Irish Finance Ministry saying 2009 would see Ireland’s worst recession on record and with the budget deficit set to reach more than three times the limit allowed by European Union rules. Irish Prime Minister Brian Cowen, who was visiting Japan in mid-January, was quick to admit the current situation faced by the country. “We’ve seen a very sharp change in our fortunes,” he said in Tokyo during an interview with International Affairs Forum. “Since we’re a very small open economy, which depends on our exports for our standard of living, the global financial and economic crisis is hitting Ireland as hard as anywhere else,” Cowen said, adding the country’s economy would contract by 3 to 4 percent this year, while the unemployment already has hit the highest since 1993. Coming after the country was blessed with average GDP growth rates of 6 percent between 1995 and 2007, such a forecast is a further blow to a public already forced to confront bleak business news on an almost daily basis. According to a report published by the Bank of Ireland in January, Irish company failures more than doubled in 2008, with 587 firms failing, while ratings agencies were recently reportedly reviewing the strength of the Irish economy ahead of a possible move to lower the ratings. Earlier this month, Cowen led a huge trade delegation of representatives from about 70 Irish companies to Japan with John McGuinness, minister of state for trade and commerce, and Brendan Smith, minister for agriculture, fisheries and food, in the hope of attracting more Japanese companies to Ireland as a destination for investment. Such a trade mission is all the more significant with the booming Irish economy having largely been brought about by foreign companies based in the country. With its relatively low corporate tax rate of 12.5 percent, eurozone member Ireland was an ideal location for many foreign companies, especially with its native English-speaking, young, well-educated, and cheap workforce. A country that had once seen many people leave for new lands in search of work suddenly became a desirable place to live and work. According to IDA Ireland, an Irish government agency, about 1,000 foreign companies, half of which hail from the U.S., have a presence in Ireland. Speaking in a separate interview in Tokyo with International Affairs Forum, McGuinness said the current global financial crisis is “not affecting the Irish government’s ability to attract new companies to Ireland,” adding, “There’s always the challenge that changes in economies will bring to different companies, but they’re facing those challenges in a positive way.” But with Eastern Europe emerging as a low labour cost alternative, the reality of the current crisis is slowly, but surely, hitting home in Ireland. The malaise worsened recently with U.S. PC maker Dell, for example, announcing 1,900 job cuts and its decision to move its Limerick manufacturing base to Poland. The Irish Independent also reported in December that one-third of the about 200,000 Polish, most of whom moved to Ireland looking for work during the Celtic Tiger era, said they were planning to go home within a year, believing they could quickly find jobs at home. Meanwhile, Ireland’s low corporate taxation, which has contributed to Ireland’s economic growth, is back under the spotlight. In June, the country voted against the Lisbon Treaty referendum and an Irish government survey held after the vote found that more than 40 percent of the voters believed the treaty would end the country’s right to decide its corporate tax rate. University College Dublin Prof. Brigid Laffan, co-author of 'Ireland and the European Union,' said the treaty would have no impact on Ireland’s taxation, and the country has a veto on it. However she added the referendum had still raised some fears among Irish. “There are very different views across the member states on corporate tax and no likelihood that they will reach a consensus,” she said. Now Ireland is heading towards a second vote later this year, which will test the public’s will vis-a-vis its position with the EU. Cowen, who is confident that Ireland will vote in favour of the treaty in the second referendum, said the deteriorating economic climate was underscoring the importance of Europe. “We are now in harder times. I think it has reemphasised for Ireland the need for us to be part of a wider zone of stability,” he said in Tokyo. “Certainly the role of the European Central Bank has been [a] stabilizing influence with us in recent months...providing access to credit, certainly providing us with a level of resources...that would not be available to us as a national central bank if we were outside the euro area.” “There is a change of attitude, change of approach, a recognition that Ireland needs Europe as Europe would like to have Ireland fully participating,” he added. However, the No vote from the country of 4.2 million people-who account for only 1 percent of the entire EU population-indicated their fears that their decision making powers could be buried within the much larger framework of the EU. The grim depression therefore presents the Irish with an even tougher decision now. As they try to weather the uncertainty, some Irish optimistically say that they have been through worse. But younger generations who have never experienced such past economic plights only know Ireland as a prosperous nation. The past decade of the Celtic Tiger has seen dramatic changes in the Irish way of life as the standard of living has improved for most and a virtually monocultural society has become multicultural. But over the decade to come, it is unclear whether Ireland will be able to see that rainbow in the sky again. Atsuko Matsumoto is a Tokyo-based writer Picture: Irish Taoiseach Brian Cowen speaks in Tokyo in January

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