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Ireland at bottom, but comeback ahead

September 9, 2011

By Staff Reporter

Michael Noonan.

It can only get better. That is the latest assessment of Ireland’s Economic and Social Research Institute which believes that the Irish economy has “bottomed out.”

At the same time, the institute believes that the bottom should be scraped a little more. It wants to see €4 billion in spending cuts in the government’s upcoming budget as opposed to the €3.6 billion being currently proposed.

Either way, the ESRI is also of the opinion that Ireland is not facing the threat of a so-called “double dip” recession.

Even though the ESRI is seeing an end to the downward spiral in Irish economic prospects, it has also scaled back its predictions for growth in its quarterly assessment, released last week. And it predicted a continued rise in the number of jobless people in the Republic, which currently stands at about 450,000 or 14.4 percent.

The institute said that economic growth would not be strong enough to reverse unemployment levels and it called for government policies to avoid a long-term crisis. Against this backdrop. jobs minister Richard Bruton was unable to offer much in the way of comfort, stating that it was impossible to predict when the economy would again see large scale job creation.

The ESRI predicted that gross national product would grow by 1.8 percent in 2011, a drop from an earlier prediction of two percent.

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It additionally stated that the reduction of the interest rate on the EU share of Ireland’s bailout loan would save €1 billion year.

The Irish Examiner reported that the ESRI report was released even as the U.S. billionaire investor in Bank of Ireland, Wilbur Ross, was predicting that Ireland “would once again” become the Celtic Tiger.

“Ireland will be the first of the euro countries to recover because they really bit the bullet,” the Cork-published daily reported Ross as saying.

Meanwhile, one of the reasons for the ESRI’s lower growth prediction has been consumer reluctance to spend. This is in large part a result of debt. Debt, in turn, is due in part to the heavy mortgage burden that many in Ireland are currently carrying.

Finance minister, Michael Noonan, has ruled out any extensive debt forgiveness for those in trouble with their mortgages, describing such a move as not a realistic option.

There was no magic bullet, or one-size-fits-all solution, he told an Oireachtas committee meeting.

“Solutions must be found on a case-by-case basis through open and meaningful engagement between the distressed borrower and the lender. While there have been many contributions to the debate including suggestions for the granting of extensive debt forgiveness, this simply is not a realistic option,” Noonan said.

Recent reports have indicated that more than 55,000 mortgages in the Republic are now in arrears for more than 90 days.

 

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