Ireland: turning over a new leaf

Will Hodges visits a country finding its way back after the financial crisis

Ireland has a population of just four million people, half the number who live in London, but up until the start of the global economic downturn, it had done well for itself.

In 2007, the economy had recorded 24 consecutive years of growth, earning it the nickname "The Celtic Tiger", while a 2005 survey by the Economist found the country to have the highest standard of living in the world.

Foreign direct investment had a central role in the country's success throughout the 1990s and 2000s . Multinational firms such as Dell and IBM took advantage of the country's low rate of corporation tax by running their European headquarters here, bringing with them thousands of jobs.

Plenty has changed since then. I am in Limerick, a city of 60,000 people nestled inside Ireland's west coast. The city was one of the areas worst affected by the economic downturn.

Walking through the city centre, there are signs all over that this once bustling town is now struggling. Charity shops and cheap thrift stores line the high street in place of coffee shops and boutique clothing stores.

Most people, I'm told, prefer to do their shopping in the mall at the edge of town where it feels safer. At one point Limerick was dubbed the murder capital of Europe, but work has been done to make its streets feel safe again.

The city's drug gangs are being dismantled and their leaders given long prison sentences. The murder rate has now fallen from its 2008 high of two per week.

Greener pastures

Aine Ni Fhaoillain is a graduate from the University of Limerick now working as a marketing executive in London.

She is one of many young Limerick men and women to have left the area in recent years to improve their work prospects.

The decision by software company Dell to switch its European base from Limerick to Poland in 2008 resulted in the loss of nearly 2,000 jobs and wiped around two per cent from the country's GDP.

At 28.6 per cent, unemployment in Limerick stands at twice the national average and nearly three times that of the eurozone as a whole.

"Dell leaving was terrible for Limerick," she explains. "The people working there had a specific skillset which isn't suited for any other kind of employment. They have nothing to do now except collect a welfare cheque each month and the government has no choice but to pay them."

The crisis coincided with the collapse of Ireland's real estate sector. A property bubble - spectacular even by UK standards - burst in 2007, creating a nationwide housing surplus which has yet to be soaked up.

In Kilkee, a popular holiday resort an hour's drive from Limerick, brand new holiday homes are selling for a little over £50,000, having once had a price tag of £200,000. A luxury hotel and bar complex recently sold for less than £280,000.

And prices are still falling. In a corner shop, the front page of the Irish Times announces the average cost of buying a home fell by 1.5 per cent during the first six months of the year.

Good things come to those who wait

And yet there are real signs the country is getting back on its feet. While most of southern Europe continues to find itself embroiled in the European debt crisis, Ireland has quietly gone about the business of restructuring its economy.

A strict diet of austerity measures has put the government on track to meet the budget deficit target set for it by the European Union by 2015 and has provided a solid platform from which to kickstart economic growth.

Supporting growth of new business has been a second priority: entrepreneurs starting a company are able to claim social security payments worth up to £240 a week for two years. It compares favourably with the UK equivalent, the government-backed startup loan scheme, which only allows young business owners to borrow money.

Six years since the start of the downturn and the economy is growing again at a steady rate. Following an increase of 0.4 per cent in 2012, the European Commission forecasts Irish GDP to expand by 1.1 per cent this year and by 2.2 per cent in 2014.

In Kilkee the bars and restaurants are full. Diamond Rocks, a coffee shop on the edge of town, is doing a brisk trade in cappuccinos, having doubled in size since the previous summer. Ireland may not be ruling the world anytime soon, but it might just be showing Europe the way forward.

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