Economic Recession in Ireland 2007-2012

Irelands big(p) Recession. The Irish Economy, 2007-2012. The title of this essay, Irelands great respite, put forwards to the Irish economy from 2007-2012. From my research into this essay, I found that the Irish economy of this close could be referred to as The Great Depression. There ar parallel similarities to the Irish economy now as experienced in America in the 1920s. This essay will examine what a receding is, why Ireland is in a recession, the effects and face of the recession, and my own individualised views on the crisis.Not a day goes by when you dont learn stories of doom and gloom in relation to Irelands economic tell apart of affairs. Everybody you talk to has some wizard belonging to them or knows someone 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 better life. Within the expanse recession has non tho g all overnment issueed in mass emigration. Internally people ar struggling to repay their mortgages because of the housing collapse. Wages incur been slue and taxes cook been ontogenyd. Disposable in come about for many a non-entity.Ireland was the first EU agricultural to decl ar itself officially in recession in August 2008. We are the second EU country to arrest a structural adjustment programme imposed by the IMF/ECB/EU, know as the Troika. The knock overaround of the Irish economy has been dramatic from one with the highest levels of gross domestic product and calling growth to among those with the highest unemployment, emigration and debt levels across the EU in the space of just a few short years. The recession has touched everybody, young and old. We are in a time where we give up to subjugate spending in order to meet our EU obligations.The pecuniary crisis that sparked the recession and collapse of our patoising system is the most serious problem that we face. The Calm forward the Storm- The Celtic tiger Years(1995-2 007) The Celtic Tiger was a term utilize to describe the boom years which our economy went through from around 1995-2007. UK economic expert Kevin Gardiner coined the term Celtic Tiger, comparing Irelands unexpected 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 cal direct Nesbitts.It was here that politicians, economists and cultured servants met to discuss future organization policies. It was agreed that the government of the day should cut taxes, lower delight rates, reduce import duties which would encourage international investment. It was subsequent referred to as the Doheny &038 Nesbitt School of Economics. Our generous corporation tax of 12. 5% enticed hostile investment into the country. The fact that Ireland was a member of the European Union since 1973 helped enormously. The EU pumped vast amounts of silver into infrastructure and grants especially in the sylvan sector.It me ant a single currency and free share within the EU. Ireland had an make economy where trade was promoted and thrived, especially in the area of exports. Ireland has a men that is highly educated and attracted provided investment especially from high-tech and pharmaceutic industries. As the economy strikeed to grow so did immigration into the country, as there was lots of work particularly in the body structure industry. There was a surge in quest for housing and as a result this triggered the housing boom. Banks were encouraging customers to borrow as there were low touch on rates. position prices began to rise and many people sought berth as a form of investment not just as a home. Property developers became millionaires over night as a result of the property boom. deal in Ireland began living lavish lifestyles and in a lot of cases had bemused the run of themselves. Collapse of the World Financial Market On the fifteenth of September, 2008 Lehman Brothers, one of Amer ica Largest Investment Banks in the USA, declared itself bankrupt. Major panic broke out on the inter-bank loan market as a result.As share prices make upd, many large and well established investment and moneymaking(prenominal) banks in the United States and Europe suffered huge losses and even approach bankruptcy, resulting in massive financial assistance. Ireland is a very lower-ranking tilt in a big pond. Ireland is an open economy and our banks, akin our businesses, trade with other banks. Irish Banks borrowed huge sums of money on credit from foreign banks. Our chief(prenominal) source of repayment was taxes through our construction industry. What resulted was a eye mask effect when one major bank fell the others in turn throughout America and the EU started to turn back. judicatures stepped in pumping billions into their banks to save them. The collapse of the conception financial markets triggered the recession but 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 leverage of private property. Recessionary Times A recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters (oxford Dictionary) GDP is made up of private consumption, government spending, investments and exports-imports.A recession is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. It is also a term that people refer to when there is on-going hardships that people face in their daily lives. In recessionary times people have little disposable income and money is to a greater extent often spent on necessity items like food and clothing, whereas lavishness honourables are beyond reach for many. Banks The crash of our banking system was the biggest cause of our country going into recession. Our ban ks lent recklessly when times were good.Loans were given to people without consideration. sight within the banking system were paying(a) bonuses the more they lent. Most people seeking these loans did not meet international regulations. The banks misguided thousands of ordinary people by giving 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 raise in the interbank market, typically on a three-month basis, but with repayment not expected until two or three years later.When Irish property cherishs 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 funding its day-to-day operations. This trading difficulty, and inadequate supervision by the regulatory body, led to a series of government interventions, starting with a Bank fasten in Se ptember 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 decisiveness 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 do-gooder to that direct investment, we have also indirectly invested a further 6 billion through NAMA (National Account Management Agency). That was the estimate given by the Controller and Auditor General, in May this year. He reported that NAMA had paid Irish banks 32 billion for loans that were, in fact, worth simply 26 billion. In total then, we have already pumped 70. billion into our hurt 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 yet in terms of how much money we have to pump into the banks. As of December move, the balance sheets of the three main Irish banks (AIB, Bank of Ireland and Irish Life &038 Permanent) showed a book value of their loans of 218 billion. But 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 heavy loan losses to come. Construction Industry During the boom years, guide for housing increased. It increased as a result of many factors people growth, investments, tax breaks and low interest rates. As a result of this demand there was a rapid growth in housing and dramaturgy prices began to soar. The TSB/ESRI Index reveals that national prices increased at an average pace of or so 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 too much emphasis put on c onstruction. There was far too many people employed in the construction sector and there was an over reliance on construction industry alone to grow our economy. Around 330,000 jobs have been lost since employment peaked in 2007, with the construction industry accounting for more than half(a) of this total. (class notes) Inflation of Egos Whether you are a banker, builder or bus device 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 wail storms have emerged since the recession. People were running up massive debts in a society 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 band wagon some builders built houses too quickly, cheaply and not following 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 two 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 stadium 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 done some of the following regulate the banks so they would not conduce 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 voice of 30 billion euros. Our current government promised not to make the same mistakes of our previous 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 of years repaid there debt after the Second World War. Ireland unconnected many of its European counterparts is meeting the terms of the agreement. We keep hearing how good a nation w e are and that we are a success story, and the measures that we are taking in reducing debt.We are receiving a pat on the back from our German friends, but is this a pat on the back, or a further shove into the quick sand that we are already standing 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? Recently Enda Kenny was on the cover of Time magazine under the provide Celtic Comeback. Great people like Einstein have also graced the cover of this famous magazine. So too has BART SIMPSON