The Great Recession: An Irish Perspective

Frances Ruane

Athens Biennale, October 12, 2013

2

Society and the Great Recession..

Return to more sombre times in Ireland BUT Seamus Heaney (2009) said that people do not

live by economics alone: “if poetry and the arts can do anything, they can fortify your inner life, your inwardness”

Creativity in all domains has strengthened Feeding into theatre, film, art, novels and poetry Feeding into new businesses and new ideas But there have been great costs ...

3

Key Features of the Irish Economy

Strong multinationals in high-growth sectors Services are really important Strong domestic food sector Significant tourism BUT High wage costs and high prices Strong vested interests (e.g. Professions) Pub Sector efficiency needs to increase Troika has been important

4

Impact of the Great Recession

Growth

Unemployment

Migration

Public Finances

Poverty and Equality

Government response required austerity plus solidarity

5

Irish Real GDP Growth 1948 – 2012

1949

1951

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

-10

-5

0

5

10

15

GDP Growth rate

Irish Growth Performance in Context

% change

Greece

Portugal

Spain

Ireland

Employment and Unemployment Rates (%)

Unemployment rate

Employment rate

2000 - 2012% %

Net Migration, Immigration and Emigration

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

-150

-100

-50

0

50

100

150

200

Emigration Immigration Net Migration

Th

ou

san

ds

9

Public Finances – Debt to GDP Ratio

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120

20

40

60

80

100

120

140

Debt as a percentage of GDP

Poverty, Deprivation & Inequality rates % %

Consistent Poverty

Deprivation

At Risk of Poverty

Gini coefficient

11

1 2 3 4 5 6 7 8 9 10

-9.0

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0Budget 2009

1 2 3 4 5 6 7 8 9 10

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

Budgets 2009 to 2013

Income distribution effects of First Austerity Budget supported Solidarity

Income Distribution Effects of Cumulative Austerity Budgets

Percentage changes in income by Decile

Distributive impact on Households containingan elderly person Vs with a child

Budgets 2009-2012

WHY?

13

The Grey Protest, September 2008

14

Ireland’s Future Growth Prospects

EU stability/performance is crucialGrowth depends mostly on exportsEU-27/US are our major markets Can Ireland recover? Confidence is crucial for growthUncertainty abounds ..

15-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0% GDP Growth

WORLD

Global Growth potential but ...

16

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0% GDP Growth

WORLD

US

EU

Lower in our key markets

17

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

GDP Growth

CHINA

WORLD

=> Higher growth means entering new markets

Ireland’s Growth Prospects: Scenarios Recovery scenario

Recovery in the EU National macro strategies work out

Delayed Adjustment scenario EU recovery Domestic recovery delayed (policy failure)

Stagnation scenario EU stagnation National macro strategies cannot work

ESRI Medium Term Review 2013

GNP

100000

110000

120000

130000

140000

150000

160000

170000

180000

2000 2005 2010 2015 2020

Recovery Stagnation Delayed Adjustment

Debt / GNP Ratio

80

90

100

110

120

130

140

150

160

170

2010 2012 2014 2016 2018 2020

Recovery Stagnation Delayed Adjustment

Unemployment Rate

0

2

4

6

8

10

12

14

16

2010 2012 2014 2016 2018 2020

% o

f Lab

our F

orce

Recovery Stagnation Delayed Adjustment

Public Finances – Current Debate

Balance between expenditure and taxation –has been 2:1 formula throughout

Approach: Deliver on agreement with Troika Current Options : 1: Cut by €3.1bn – as per Troika Agreement ( 2: Take benefit of increased recent

performance and cut by less the €3.1bn Government and Troika: €2.5 bn Solidarity Focus

23

Trade Union March, 2012

Economic Overview

Austerity approach has been painfulSocial Response has been relatively muted ..Distribution effects have helped solidarity Delivery on promises rewarded by marketBUTMany old legacy issues not yet tackledNew legacy issues will need to be sortedLooking forward

25

Looking Forward..

Creativity

Transformation

Flexibility

Innovation