Sunday, September 23, 2007

Ireland-If there is a slump who talked us down?

Today the Sunday Independent hit out at those who it alleges are talking down the economy.
In an amazing article headed IF THERE IS A SLUMP WHO TALKED US DOWN?
There are quotations from David McWilliams and George Lee and Alan Ahearne. The implication is that all three are somehow economic saboteurs.
Ireland's economic boom was fueled by a number of factors:

  • The Irish pound was devalued by 10 per cent within the ERM at the end of January 1993. Bertie Aherne as Minister for Finance opposed this. However the power of the markets forced the FF/Labour government to back down. This gave Ireland a competitive advantage.
  • Membership of the Euro resulted in a reduction of interest rates. This boosted the property market. The country was awash with cheap money. The fact that the German economy was in the doldrums kept Euro interest rates low. We benefited from German difficulties.
  • A favourable Euro/Dollar exchange rate boosted exports to the US.
  • The 12.5% Corporation Profits Tax proposal of the Rainbow Coalition of FG/Labour/DL was a masterstroke.
  • Now conditions have changed. The German economy is picking up. Euro interest rates have risen. The Dollar has dropped because of economic difficulties in the US . This has major implications for US companies operating here.We are caught with a double whammy. The astronomical volume of private debt in Ireland is exacerbated by rising interest rates. The building industry boosted by cheap money has begun to contract as interest rates rise. An economy over-reliant on building and construction must restructure. Exports are under pressure further threatening jobs.
  • High levels of Stealth Taxes have also blunted competitiveness.
  • It is not economic sabotage to point out the facts. It is economic sabotage not to deal with the realities. In saying this I do not necessarily always agree with David McWilliams and George Lee and Alan Ahearne. However it is most unfair to demonise them.
  • This country has a great future if the correct decisions are taken.

In the Sunday Business Post today David McWilliams answers his critics with an article titled "Ireland has become a fat, flabby nephew of an ailing Uncle Sam".

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