Small GDP growth is better than any recession. In addition, it has recently become more and more other signs that Ireland is strengthening its positions, moving away from PIIGS fellows. This, in particular, concern business activity indicators: the PMI index in Irish industry made 51.8 this September, which clearly shows an increase in value since August indicator of 50.9, while the PMI was generally declining in the whole Eurozone. Finally, the value above 50.0 is the direct evidence of recovery in the manufacturing sector of Ireland (FitzGerald 1252-3; Armingeon and Baccaro 265-6).
As for the real estate market, the housing prices show moderate growth, but not the decline and collapse, as in Greece, for instance. The growth rate in the value of real estate in Ireland made 0.2% in July, and showed progress by 0.5% in August. By the way, this was the strongest dynamics since February 2007 (Bertaux and White 209). To a large extent, this growth was stimulated due to the improvement in overall economic conditions, stabilization of the banking sector and strengthening of the demand. Among the main factors for the expected success in exiting from the stalemate situation of Irish economy, technical excellence in comparison to fellow PIIGS countries, better quality of control of the Irish economy, as well as the predisposition to preserving investment in the country may be noted.
However, in general, at the moment the Irish Government is involved into a program of economic aid, and, therefore, it still doesn’t have full abilities to establish economic growth with internal resources. Here it should be noted that the actions of the European Central Bank, which made a serious effort to make Ireland agree to accept help from international lenders in 2010, are increasingly generating criticism. Economists like Colm McCarthy even urged the authorities of Ireland to lodge a lawsuit against the ECB to the European Court (cited in FitzGerald 1248). In his view, the monetary regulator exceeded its authorities by forcing Irish taxpayers take on their shoulders the losses of unsecured bonds holders. And thus, Ireland again plunged into a dangerous situation in 3 years after the crisis and, on the advice of the “Troika”¯ of international lenders on behalf of the EC, ECB and IMF, was forced to accept the next tranche of financial assistance in the amount of 5.8 billion euros, though after the expected positive results of 2011 the Irish Government was stating to be the first country to refuse from economic aid from the EU.
Besides, the decision of the European Central Bank to buy government bonds of problematic Eurozone countries not just creates a stable working mechanism of support for the weak economies of Europe, but also generates a number of problems for the strong economies in the Eurozone. For instance, this threatens with the additional tax burden on the most prosperous countries’ taxpayers. The participation in the ECB in buying government bonds of troubled countries can also reduce the interest rates investors want to receive, being at the risk and putting their money into the crisis EU economies, i.e. the participation of the ECB in buying these government bonds artificially understates their profitability.
Thus, today, in order to adjust the economic growth, the Irish government is factually forced to rely on foreign investment, while it is expected that these investments will continue to decline. Recent efforts on attracting investors from the U.S. and China demonstrate Ireland’s intensive search for investment outside Europe (Armingeon and Baccaro 270-1). The boom in Ireland can surely be driven by the U.S. investment, but for the new Irish economic boom, more of such investments are needed, as well as increased consumer spending in Europe, which is unlikely to show up in 2012. But since the country is closely linked to the EU in economic terms and as long as Ireland still has good working relationship with the “Troika”¯ (European Commission, the ECB and the IMF), it may be expected that international lenders will ease some of the conditions for Ireland, such as interest rates and terms of repayment of promissory notes, which will cost the Irish government about 50 billion euros in the next 20 years (Bertaux and White 202-204).
On the other hand, it is clear that Germany will continue to oppose the easing in the implementation of the austerity program for Ireland, in particular, it will be against the debt relief. As an argument in favor of easing the terms for Ireland, the government bond yield performance of the country during the last auction may be marked, which showed market participants’ satisfaction with the rate of reform program implementation in Ireland. In July 2012, Ireland first returned to the capital market after almost two years break, having managed to attract 500 million euros. Test accommodation of bills proved to be successful: the demand exceeded the supply by almost 2 times (Bertaux and White 203). In addition, the easing of credit terms is able to prepare Dublin for entering the bond market, when the international assistance comes to an end.
Thus, experts are expecting the economic growth of Ireland in the next two years, and if the predictions come true, the Irish government will be the first one who will manage to get out of the debt trap. In this case, the boost in the growth could be explained by future growth in exports on the one hand, and stabilization of domestic demand on the other hand.