It was a very interesting time to visit Ireland. The country is in the midst of a financial implosion that makes ours look downright palatable.
In the early 1990s, Ireland was one of the poorest countries in Western Europe. The formation of the European Union and aggressively low corporate tax rates drew a multitude of new business opportunities to the nation. The result was explosive economic growth, dubbed “The Celtic Tiger”.
Companies moved to Ireland by the dozen. Jobs were everywhere; unemployment went from double digits to 3% (which is technically “full employment”). Wages soared. People from all over the world moved there to take advantage of the good times. From 1995-2007, almost every year resulted in GDP growth nearing (or even exceeding) double digits.
Suddenly, Ireland was the richest nation in Europe.
In the meantime, the average home price neared $500,000. That’s nationwide, mind you—not just in Dublin. Disposable income was plentiful, but inflation topped 5% per year. Wages grew so high that jobs were being (gasp!) outsourced.
And now…saying the bubble has burst is a vast understatement.
Property values have plummeted by 40% (again, this is nationwide, not just in pockets) and some are predicting a real devaluation of 75% by the time it’s all settled. The economy is set to contract by 8% in 2009. Unemployment is over 11% and CLIMBING.
And on April 7th, as we were driving along the west coast, the emergency budget was broadcast on the radio.
My jaw dropped. Income and health care levies were doubled instantaneously. What amount to tax credits for kids were cut in half. Mortgage interest deductions were phased out.
The newspaper summed up that a family earning 60,000EU would be paying an extra 185EU per month. Think about that—how many families earning $60k here in the states have an extra $185 just sitting around every single month? Okay, now double that family’s mortgage payment and answer the question again. (Yes, I’m ignoring the exchange rate because the higher prices there make their buying power in Euros about the same as ours is in dollars.)
It was obviously the talk of the nation while we were there. People are justifiably terrified.
Here are the effects on different people in different situations. They’re very short and totally worth reading; you can even skip to the bottom to read one sentence and see how badly some of these people are going to be affected.
At the very least, we can appreciate that our economic situation could certainly be worse.
Okay; that was depressing! Here are some pictures to cleanse your palate.