Irelands economy is sinking

It is estimated that by 2012 a hundred thousand of unable to find work or unemployed Irish will start to emigrate.  Most of those countries are the English-speaking countries such as: Great Britain, the United States, Canada or Australia. However, the fourth most popular country in which the Irish people hope to find a job is Poland.

Here is the direct expression that the stick has two ends, because the Irish are finding themselves now in such a bad economic situation that the Polish haven’t experienced while in their deepest economical crisis in Poland. The unemployment rate in Ireland currently stands at 13.6 percent and it is rising. The major Ireland’s companies continue to inform about huge dismissals. Just in the last October 21st the number of large corporations including IBM and a flight company Shannon Airspace had to dismiss thousands employees and it is just a small example.

Situation is Critical

As the analysts of Financial Times journal said: that if the Irish situation would have happened in any of a larger and more influential European country then our continent would be experiencing a financial collapse. “Fortunately, Ireland is a small and unimportant to anyone” – sarcastically noted the economists.

It appeared that the Irish budget deficit is at its highest if to compare to the rest of the world and this year will be higher than 30 percent. In other words, it will be at least 10 times higher than the rate allowed by the EU countries.

As well the forecasts for the Irish economy are not so good. Even in July it was thought that the Irish GDP would grow 1 percent this year, but now it appears unlikely that probably there wont be any growth, so the annual GDP growth could be a zero, and still if the country will be lucky enough.

And another thing, such as Irish bank rescue operation. The largest Irish Bank, Anglo Irish Bank, only by a hair’s breadth was rescued from the bankruptcy, since it was reported that since the beginning of June, just during five months the bank lost 8.2 billion Euros, and over one year in total – 12.7 billion Euros, it is the highest amount in the history of the Irish banks.

So in order to save the bank it was decided to allocate a further 5 billion from the poor country’s budget together with already another 25 billion Euros that had been allocated to the bank during the past recent years.

Is this the fault of low taxes?

However, what are the causes of all these huge economic problems in Ireland? Irish economist, Michael Henniganas, assumed that Ireland began to dig a hole for itself when years ago it was decided to become a very low-tax country and the foreign corporations started to flow into the country massively.

In Ireland at 1993’s, the fees paid by corporations were 40 percent, and now it is just 12.5 percent, it is the smallest smallest amount not only in Europe, but also all over the world. In addition to that, Ireland was given an exception and the country was allowed not to pay the taxes to the European Commission on the income from all exports. On one hand, all of this led to a flourishment of the Irish economy and attracted the foreign investment, but the stick has two ends towards that too. Some other EU countries have almost forgotten their crisis and Ireland is still deep in it, because the country is collecting the smallest amount of taxes if to compare to other European countries and its budget is empty and full of holes.

Like the economist M. Hennigan said that to become a tax heaven is a good idea to attract the foreign capital, but 17 years ago the whole system with taxes was reduced way too much, to its minimum, and finally it has caused many losses to the country these days.

Moreover, since the huge lack of money, Ireland is forced to borrow extensively. Thus, it is considered that in 2012, the public debt at the end will have 105 percent GDP, and the debt service charges will reach of around 5 percent GDP. So at the end one-sixth part of total government revenue will be given away in order to cover only the interest of all creditors.

So what is going to happen to Ireland and is the economic crisis eventually will start to drift away? Only time will tell.


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