Economic Recession in Ireland 2007-2012

Ire lays Great Recession. The Irish Economy, 2007-2012. The title of this essay, Irelands big(p) recession, refers to the Irish scrimping from 2007-2012. From my research into this essay, I found that the Irish deliverance of this period could be referred to as The Great Depression. in that respect are latitude similarities to the Irish preservation now as experienced in the States in the 1920s. This essay will examine what a recession is, why Ireland is in a recession, the gists and face of the recession, and my own personal views on the crisis.Not a day goes by when you dont hear stories of loony toons and gloom in relation to Irelands economic state of affairs. Everybody you babble to has whatsoever angiotensin converting enzyme belonging to them or knows some genius who has had to emigrate. Australia has replaced America as the land of hope and dreams, as thousands flock our shores in search of a give life. Within the country recession has not only resulted in vi ew emigration. Internally mess are struggling to repay their mortgages because of the house interrupt. remuneration induct been cut and measurees suffer been increased. Disposable income for umpteen a non-entity.Ireland was the premier(prenominal) EU country to declare itself officially in recession in August 2008. We are the entropy EU country to pee-pee a structural adjustment programme imposed by the IMF/ECB/EU, known as the Troika. The turnaround of the Irish economy has been dramatic from one with the highest levels of gross domestic product and employment growth to among those with the highest unemployment, emigration and debt levels across the EU in the aloofness of just a few short years. The recession has affected everybody, late and old. We are in a time where we have to cut outgo in order to meet our EU obligations.The monetary crisis that sparked the recession and collapse of our banking system is the most serious problem that we face. The Calm before th e Storm- The Gaelic tiger Years(1995-2007) The Celtic Tiger was a boundary used to let out the boom years which our economy went through from around 1995-2007. UK economist Kevin Gardiner coined the term Celtic Tiger, comparing Irelands un evaluate economic take-off to the Asian tiger economies. Many believe the foundations of the Celtic Tiger were laid in the 1990s in a Dublin pub called Nesbitts.It was here that politicians, economists and civil servants met to debate future g everywherenment policies. It was agreed that the g overnment of the day should cut taxes, demean interest evaluate, reduce import duties which would encourage foreign enthronement. It was later referred to as the Doheny & Nesbitt School of Economics. Our generous corporation tax of 12. 5% enticed foreign investment into the country. The fact that Ireland was a member of the European Union since 1973 helped enormously. The EU manage vast amounts of money into infrastructure and grants especially in t he agricultural sector.It meant a single currency and free trade deep down the EU. Ireland had an open economy where trade was promoted and thrived, especially in the area of exports. Ireland has a workforce that is passing educated and attracted further investment especially from high-tech and pharmaceutical industries. As the economy started to grow so did immigration into the country, as there was stacks of work particularly in the plait effort. There was a good care in demand for lodging and as a result this triggered the housing boom. Banks were encouraging customers to borrow as there were low interest rates.Property prices began to build up and many people sought property as a configuration of investment not just as a home. Property developers became millionaires over night as a result of the property boom. People in Ireland began living lavish lifestyles and in a lot of cases had lost the order of themselves. Collapse of the World Financial Market On the 15th of family, 2008 Lehman Br new(prenominal)s, one of America Largest Investment Banks in the USA, declared itself bankrupt. Major panic stony-broke out on the inter-bank loan market as a result.As contri scarceion prices declined, many large and well established investment and commercial banks in the United States and Europe suffered huge losses and even faced bankruptcy, resulting in massive financial assistance. Ireland is a very small tip in a big pond. Ireland is an open economy and our banks, like our businesses, trade with other banks. Irish Banks borrowed huge sums of money on credit from foreign banks. Our of import source of repayment was taxes through our construction industry. What resulted was a domino effect when one major bank fell the others in turn end-to-end America and the EU started to add up.Governments stepped in pumping millions into their banks to save them. The collapse of the world financial markets triggered the recession provided some countries suffered a lot worse than others. Ireland is one of those countries, because Ireland borrowed beyond their means but mainly to support the purchase of confidential property. Recessionary Times A recession is a period of flying economic decline during which trade and industrial activity are reduced, more a good deal than not identified by a fall in GDP in two conquestive quarters (oxford Dictionary) GDP is made up of buck private consumption, government spending, investments and exports-imports.A recession is typically accompanied by a bewilder in the stock market, an increase in unemployment, and a decline in the housing market. It is to a fault a term that people refer to when there is on- expiry hardships that people face in their daily lives. In recessionary time people have low disposable income and money is more often spent on necessity items like food and clothing, whereas luxury goods are beyond reach for many. Banks The crash of our banking system was the biggest cause of ou r country going into recession. Our banks lent recklessly when times were good.Loans were given to people without consideration. People inwardly the banking system were paid bonuses the more they lent. Most people seeking these loans did not meet international regulations. The banks misguided thousands of ordinary people by grown these loans for enormous amounts, knowing that they realistically could not afford repayments. During the Celtic Tiger period of growth, capital to finance Irelands boom was raised in the interbank market, typically on a three-month basis, but with repayment not expected until two or three years later.When Irish property set went into decline and the freezing-up of the worlds interbank market in 2007, it was certain by the start of 2008 that the Irish banking system would have great difficulty in financing its periodical operations. This trading difficulty, and inadequate supervision by the regulatory body, led to a series of government interventions, s tarting with a Bank guarantee in September 2008. It is nearly four years since the fateful night of September 29th/30th 2008 when the Irish government guaranteed the key financial liabilities of our biggest banks.That finality has dominated national politics since then. For the economic and political consequences of that decision are immense. Since 2008, Irish taxpayers have invested 64. 1 billion into our banks. In addition to that verbatim investment, we have also indirectly invested a further 6 billion through NAMA (National Account Management Agency). That was the estimate given by the control condition and Auditor General, in May this year. He reported that NAMA had paid Irish banks 32 billion for loans that were, in fact, worth only 26 billion. In total then, we have already pumped 70. billion into our ailing banks. Thats the equivalent of 46,700 for every person working full-time. Its a second mortgage that we didnt want and can barely afford. And we mightnt be finished ye t in terms of how much money we have to pump into the banks. As of December last, the balance sheets of the three main Irish banks (AIB, Bank of Ireland and Irish Life & Permanent) showed a book value of their loans of 218 billion. just now the banks own aggregate estimate of the fair value of those loans was only 181 billion, some 37 billion below their balance sheet carrying value.That suggests further menacing loan losses to come. Construction Industry During the boom years, demand for housing increased. It increased as a result of many factors population growth, investments, tax breaks and low interest rates. As a result of this demand there was a rapid growth in housing and house prices began to soar. The TSB/ESRI proponent reveals that national prices increased at an average pace of almost 15% per annum between the years of 1997-2006, resulting in a cumulative increase of 240% over this period. (class notes) Ireland tried to grow its economy inward through construction.It did so but there was besides much emphasis honk on construction. There was far too many people employed in the construction sector and there was an over trust on construction industry alone to grow our economy. Around 330,000 ruminates have been lost since employment reach in 2007, with the construction industry accounting for more than half of this total. (class notes) splashiness of Egos Whether you are a banker, builder or bus driver it seemed that everyone had a second car and second home during the Celtic Tiger years.Having a little place in the sun seemed the norm. However thunder storms have emerged since the recession. People were running up massive debts in a community gone mad. People were borrowing beyond their means with banks only too happy to oblige. While people must be responsible for the choices they make, perhaps the banks, the so called experts in finance should have been more responsible. Everybody jumped on the plenty wagon some builders built houses t oo quickly, cheaply and not interest safety regulations. Priory Hall) Tradesmen were demanding and receiving vast sums of money for their work. According to Ronan Lyons an Economist in Oxford University, a recession becomes a depression when you have a fall in GDP by more than 10%. He has compared both job losses in the USA in the 1920s to that of Ireland now. The results are striking. As the graph below shows, Irelands situation closely resembles the Great Depression. (Lyons ,2012) Irish GDP has fallen recording a peak to trough fall of 12. 4% (Class Notes) ConclusionAs I said earlier Ireland is a small fish in a big pond. The majority of people like to point the finger at the last government as I would, but not as strongly as others. Our last Government had a part to play. However there was a world-wide recession and we would have suffered economically as a result as every country has within the EU. I believe however that our last government could have through with(p) some of th e following regulate the banks so they would not lend recklessly, re invests elsewhere in the economy for growth when times were good.There was an over reliance on construction to feed the economy. They could have increased interest rates to bring down inflation therefore slowing the economy. The government could have closed Anglo Irish Bank- Anglo is mainly a commercial bank with little customers in Ireland. This would have saved Irish taxpayers in the region of 30 billion euros. Our current government promised not to make the same mistakes of our anterior government in their pre-election manifestos.They now tell us they are locked by the terms of the EU/IMF bailout. Can our government not re-negotiate a deal? Can they not tell Europe that further cuts cannot be put in place if we are to see growth in our economy in the long term? Germany only in the last couple on of years repaid there debt after the Second World War. Ireland unlike many of its European counterparts is meeting t he terms of the agreement. We keep hearing how good a nation we are and that we are a success story, and the measures that we are fetching in reducing debt.We are receiving a pat on the keystone from our German friends, but is this a pat on the back, or a further shove into the quick sand that we are already stand up in? Is it a sign of success that young Irish people are emigrating, that the dole queues are getting longer? It is a success that the people of Ireland will be in debt for years to come? latterly Enda Kenny was on the cover of Time magazine under the caption Celtic Comeback. Great people like Einstein have also graced the cover of this famous magazine. So too has BART SIMPSON