Université Mohammed V- Agdal

Faculté des sciences juridiques, Économiques et sociales

Rabat

Master : Monnaie Finance Banque

The Irish crisis

Travail réalisé par : Aoubiza Sara

Ikko Soufiane

Professeur de la matière : Mlle. K. Lajfari

2010-201
 The Irish crisis

After the Greek episode, it’s Ireland turn now to be the main point of the
media.

Hailed as the "Celtic Tiger" for the rapid growth of its economy, in a short
space of time the Irish Republic has gone from boom to almost bust.

In fact, Ireland was considered as an economic developpement model. At the

time of its adherence to the European union in 1973, Ireland was one of the
most poor regions of the union , and it has taken about fifteen years to set up
a sequence of measures which borne fruit in the 90’s. And in less than 15
years, from 1993 to 2007, Ireland has doubled the size of its economy

So what happened to the tiger’s economy?

The Irish economy is currently facing some huge difficulties.

In fact, all has started because of a property bubble which took a heavy toll
on the banking sector. And for fear of a bankruptcy of its banking houses,
the government decided to step in. End of September, it injected around 45
billions of Euros in the sector, so as a result of state support to banks , the
budget deficit is staggering 32% of GDP, whereas the European union
standard is only 3%.

Trying to avoid a domino effect in Europe, on the one hand the European
union and the International Monetary Fund have decided to bail out Ireland
with 85 billions of Euros; €48bn would be used to fund the government
deficit over the next three years, with €15bn-20bn to recapitalise the banks,
and an extra contingency fund of €20bn, which Ireland could tap as needed
over the next few years

On the other hand, Ireland unveiled a four- year austerity plan to help secure
bailout.
The austerity measures which would slash public spending over four years,
would help pay for a severe banking crisis that has depleted the country’s
finances and led to a dramatic weakening in the government.

The plan achieves savings through welfare cuts worth 10 billion Euros
($13.4 billion) and higher taxes, expected to bring in 5 billion ($6.7 billion).

The minimum wage will be reduced by 1 euro ($1.34) to 7.65 ($10.25) an

hour and public sector pay will be reduced by a total of 1.2 billion Euros
($1.6 billion) over the four years.

Other measures included in the austerity plan are the introduction of

property and water taxes by 2014 and increasing the value-added tax (VAT)
on goods and services from 21 to 23% by 2014.

Income tax bands will be widened so that more lower-paid workers will pay
taxes, and middle-class workers can expect their annual tax bills to rise by
more than €3,000. Welfare payments will be gradually reduced.

But concerning the corporate tax, the plan calls for keeping it at 12.5%, a
way to encourage businesses not to leave the country.

This means a huge sacrifice from the Irish people, whose anger and
disappointment over the situation led to a political crisis inside the country.
An erosion of support from the government coalition partners this week
means T.B. Cowen (Irish Prime Minister) is unlikely to survive in office
much beyond the New Year.