In the run-up to Ireland's second referendum on Lisbon, business organisations were among the most vociferous 'yes' campaigners. They argued that the EU's transfers of funds boosted growth in Ireland, allowing it to wean itself off dependence on the United Kingdom with which it has a fraught colonial past.
"If we continue to be the only English-speaking economy in the euro zone and a core member of the European Union, then we will maintain our position as one of the most logical investment locations for serving the European market of 500 million people," Ian Talbot, chief executive of business group Chambers Ireland, said on referendum day (2 October).
Ireland was perceived as a gateway into Europe, Jim O'Hara, vice-president of Intel Corporation, argued in his campaign for a 'yes' vote. Multinationals singled out Ireland as a wider investment opportunity as low corporate tax, a well-educated workforce, competitive cost structures and EU membership created the perfect breeding ground for Europe-wide expansion.
Budget deficit to exceed forecasts
A Lisbon 'yes' potentially means that Ireland still fosters excellent growth prospects for multinationals, but there are signs that the steady stream of foreign labour and low taxes that led Ireland to be dubbed the 'Celtic Tiger' will not be permanent fixtures of the country's recovery.
Government spending cuts and stimulus injections are still not yielding the sluggish recovery that has been detected in France and Germany (EurActiv 18/08/09).
There are no signs of the country's deficit bottoming out soon, as Ireland's department of finance fell far short in its predictions on tax revenues and the budget deficit at year end.
The Irish Exchequer will require another two billion euros, bringing total borrowing this year to 26 billion. This year's deficit is now expected to reach 12% of GDP, 2% higher than the spring forecast.
Ireland's live register - a register of people claiming unemployment benefits - has dropped 2.3%, which could mean one of two things: people are getting jobs or people are leaving the country. The unemployment rate did not waver from last month's 12.6%, but the Central Statistics Office (CSO) argues that it is too soon to speak of stabilising employment levels, as emigration accounted for the registry's drop. Nearly 2,000 foreign nationals left the register in September, according to CSO figures.
Commission to review Irish economy
The European Commission is investigating Ireland alongside 10 other member states for excessively high deficits, triggered by the worse economic crisis since the 1930s. Under the terms of the Stability and Growth Pact, adopted in the framework of the 1992 Maastricht Treaty, the EU executive can launch proceedings against member states who are not complying with the pact's terms of keeping the annual budget deficit under 3% of GDP and national debt lower than 60% of GDP (EurActiv 02/10/09).
The Commission review will examine whether public spending is in line with the pact's requirements of four billion euros of spending adjustments in 2010 and 2011, with further cuts of 3% a year until 2013. The commissioner for economic and monetary affairs, Joaquin Almunia, is reportedly reluctant to grant an extension beyond the pact's 2013 deadline.
Ireland's excessive deficit review will also take into account the government's shortfall in tax revenues. An EU summit in December will reveal results from current proceedings.
