Spotlight on Geopolitics

The end for a paper tiger

For over two decades now, we got used to being force-fed by the English-speaking media with regular upbeat stories about Ireland, EU’s own “tiger”. Thus for the first time in the young republic’s history, “the luck of the Irish” fatalism had given way to optimism and to the widely shared belief that Ireland had finally made it. The high growth rates in a seemingly vibrant economy and a flurry of FDI were cited as proof of Ireland’s economic flair.

Sadly, the credit-drunk nation has seen its dreams shattered by the same global economy it worshipped for years. The Irish business and political elite, probably the best practitioners of neoliberalism outside Britain and the USA, have led the country into one of its worst economic predicaments ever. Combined, Irish banks have racked in some 400 billion euros in bad loans – a staggering amount for a nation of only 4,5 million citizens. Instead of guaranteeing only deposits, Mr Cowen’s government foolishly decided to protect the country’s reckless banks, especially the Anglo-Irish Bank, against default. This policy, too, is a standard practice in a true blue neoliberal economy. Profits accrued to the business elite, losses are spread among hapless taxpayers.

Not so long ago, Irish voters have initially refused to cast their ballots in favour of the adoption of the Treaty of Lisbon. To their chagrin, their best chances for salvation come from an 80-billion euro rescue package put together by the European Union officials they were taught to resent.

When the financial crisis hit in 2008, the Irish government was quick to implement austerity measures, trying to avoid the inevitable. After three years of austerity – cuts in wages and social services – the Irish deficit actually increased to 30 % of GDP, the biggest in the Western world. Gone are the yachts and the lavish lifestyle, shopping across the border in Belfast or abroad. The Irish face another three years of austerity, courtesy of the same Mr Cowen whose government made sure everyone suffers but the institutions responsible for fuelling unreasonable economic expectations on credit. This, to be sure, is a hefty farewell present which comes on top of taxing businesses in Ireland at a ridiculously low 12,5 percent for years. And some naysayers claim neoliberalism doesn’t work… (sources: The Economist, Reuters, Deutsche Welle, Le Monde, NYT, etc)

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  1. Ireland, Greece, Spain, Protugal, and the U.S.: All Major Borrowing Nations. By the U.S. increasing the money supply, they will drive up inflation and internal interest rates. This may attract more foreign investment. I don’t believe the U.S. is weakening the dollar to create exports, though that is what the media pundits tell us. The weakened dollar makes foreign investment much more palatable. The 70’s and the 80’s were prime times for foreign real estate and business investment. High inflation and high interest rates created a weak dollar that brought millions of dollars in Arab and Chinese investment. The U.S. is still a very desirable place to live for many around the world. In the 80’s, Chinese bought property here and eventually emmigrated to live here permanently. If China cannot straighten out the schism it has between its rich coastal areas and the agricultural eastern part of the country and unrest ensues, we may see a new influx of rich Chinese once again in a few years.

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