In a week that has seen the Irish PM resign, Professor Stephen Roper discusses the impact of the country’s economic crisis on the UK.
In a week that has seen the Irish PM resign, Professor Stephen Roper, professor of enterprise at Warwick Business School, discusses the impact of the country’s economic crisis on the UK.
Certainly the UK has a stake in the success of the Irish economy. For quite a lot of British businesses, Ireland is a very significant export market and, for a number of them, their only export market, particularly for UK companies based in Northern Ireland.
That said, I am not necessarily in favour of the UK supporting Ireland on a bilateral basis. I think it is much better that the UK works in alliance with its European and international partners because I think the scale is such that it requires international contribution.
If I were the Irish government, I would fight very hard to avoid having to give up the 12.5 per cent corporation tax rate. It has been one of the key incentives for inward investors from the US and other countries to establish a European base and has made Ireland a very attractive place to do business.
There is a lot of strength in the Irish economy, but it has been undermined by a rather unfortunate property boom that is quite separate from the country’s economic fundamentals, which remain sound. There is a good manufacturing base and a quality service sector in Ireland. The supply side of the economy is strong but the behaviour of the banks and the financial sector has weakened it.
Deep government debt, which was caused by large-scale bailing out of the banks, forced Ireland to accept an €85 billion (£72 billion) package from the European Union, International Monetary Fund and individual European nations in November last year. The agreement occurred days after Prime Minister Brian Cowen claimed the country did not need help.
Since then, there has been further turmoil. Cowen resigned as leader of the ruling Fianna Fail party on January 22 after calling a general election for March 11.
The current government is mired in the history of the crisis. It might be beneficial to have a new government that could, if it commanded the confidence of the Irish electorate, actually make a positive stab at building for the future. In the short term, though, a general election is not ideal for building stability.