Irish Economic Performance within the EU

Although Ireland had experienced something like an ‘economic take-off’ in the 1960s it was the poorest state in the EEC when it joined in, with a  GDP per capita of 53 per cent of the Community average, the lowest of the then 9 member states. The domestic economy remained heavily dependent on agriculture whilst the UK remained by far Ireland’s most important trading partner. The early years of membership were not particularly encouraging. The world oil crises produced considerable negative shocks which impaired European growth. Domestic mismanagement of the economy, in particular after the 1977 general election, did an enormous amount of damage. With the jump in world interest rates in the early 1980s and a slowdown in the UK economy, Ireland’s problems deepened. Political instability worsened the economic climate: the budget deficit soared, the level of public debt ballooned out of control, unemployment and emigration increased exponentially, and despondency set in over the seeming inability of government to get the public finances under control. A change in fiscal strategy in 1987, however, finally laid the basis for a resolution of the crisis in the public finances. The vast subvention secured under the structural funds after 1988 facilitated much-needed infrastructural projects which had been impossible to implement during the fiscally precarious years. And finally, a further positive impetus towards growth came via the lead-up to the Single Market (or ‘1992 Programme’) which saw a huge increase in FDI flows both into and within Europe, of which Ireland captured a much  increased share.

The story of the subsequent ‘bubble’ years of the ‘Celtic Tiger’ economy is well known. Combined with steady improvements in productivity, the economy delivered a period of extraordinary growth. Between 2000 and 2007, the annual average growth in real GNP was 5.0 per cent.  Employment rose steadily from 1.1 million in the late 1980s to 2.1 million in 2007; concomitantly unemployment shrank from 16 per cent in 1994 to 4 per cent in 2006, essentially full employment for the first time in modern Ireland’s history, an important element of the divided of investment and growth. From 1987 to 2007, economic growth averaged 6.3 percent per year. By 2008 Irish GDP per capita had reached 140 per cent of the EU average, the second highest level of wealth after Luxembourg. By any standard this change represented a quantifiable leap in Irish economic performance.