Good morning Ms Schraik , good morning dear colleagues!

Today it’s my turn to present you the Celtic Tiger and the economic crisis in Ireland.

In order to keep the presentation structured, I’m going to start with the Celtic Tiger since happened
before the economic crisis. So I’m pretty sure that every one of us has already heard something
about the Celtic Tiger, but for those who haven’t heard of it or may have forgotten the Celtic Tiger
was an Economic period in Ireland from circa mid 1990 to about 2008.

My first reaction or question when I first started to cope with this topic was “Why is this period called
“Celtic Tiger”. Then, during our class in Ireland, I asked my teacher Bernard and he gave me the
information that there was a similar economic Period in Asia and they called this period the “Asian
Tiger”. That’s the reason why the Irish decided to take the name and just change it from Asian to
Celtic. And I’m pretty sure you all know why they called it “Celtic”? Yes, exactly. Because the Irish are
originally Celts. Tiger was just a name in order to describe the boom, since a tiger is known to be very
powerful.

I’ve divided the Celtic Tiger in three Phases. But before I start with Phase 1 I think it’s necessary to
know that the 1980’s were terrific as far as the economy was concerned. Ireland suffered from a
huge inflation and people had to pay a lot of taxes. These economic struggles were the reason why a
lot of Irish people started to emigrate. The enormous emigration rate opened the politician’s eyes
and they finally decided to change things. However it must be said that one of the very few positive
things that happened during this time period was the investment in education. The Irish people
literally put every single penny into the education system. You will later get to know why this was
such an important step. Another crucial factor during this time were the negotiations with the trade
unions. Thanks to these negotiations, Ireland got industrial peace which was the reason why there
were no strikes anymore.

So let’s start with phase 1, so the period to 2000:

First of all the European Union started to help them by giving Ireland a structural funding which led
to quality capital investment in roads and infrastructure. Then Ireland started lowering the
corporation tax rate of 12.5%. Joining the EU and gaining a strong currency was the cherry on the
cake; Ireland became more attractive than ever- it has a low corporation rate, it had a young and well
educated work force, good labour relationships, it was an EU member, it’s an English-speaking
country, it has a strong currency and it was this certain period where the dot com bubble boomed.
Everything I’ve just mentioned made Ireland attractive to other countries, that’s why they started
investing into Ireland. Between 1995 and 2000 Ireland experienced an economy expansion at an
average rate of 9,4%!

A lull followed and the reason for this lull were on one hand the Dot Com bubble that burst and on
the other hand the 9/11 attacks that dampened the American investment. 9/11 was also responsible
for a slump in tourism. Another setback was the foot and mouth outbreak that damaged the meat
exports.

However things obviously got better. Let’s come to phase. This was the period from 2002 to 2008

First of all the government started to increase public spending and the income tax was cut. That’s
why nearly all the social benefits increased every year. Furthermore bench marking of public sector
salaries with private sector salaries led to a huge increase in costs in order to provide public services.

Benchmarking : The objectives of benchmarking are (1) to determine what and where improvements are called for,

(2) to analyze how other organizations achieve their high performance levels, and (3)to use
this information to improve performance
These little thought out high costs that were spent of course appealed to both Irish and foreign banks
and financial institutions. Dot Com companies that survived the burst of the bubble, e.g. Facebook,
Google, Amazon, PayPal,.. continued investing in Ireland. Everything continued going the perfect
direction with Europe lending money to very low interest rates which led to a building boom. That’s a
benefit, as you probably know, the Irish prefer having own houses. Banks became more and more
reckless in their lending to developers, that’s why the Irish economy needed to have a high interest
rate in order to control the investment in the building industry. So as you can probably tell personal
credits became available very easily and mortgage loans were available for everyone.

So what’s your opinion now to the current phase so phase 2? How does it seem to you?

Everything seems to be perfect, maybe too perfect. And that’s what happened next:

The End:

2007 changed everything; the price of property rose and became unsustainable. As a result of this
normal workers could no longer afford to buy own houses or apartments. The building industry
consequently slowed and banks had to struggle with defaults on loan repayments. Credits from
European banks and Irish banks ceased which was the major reason why all main banks went to the
government on the night if the 28 th of September 2008 to tell them they were insolvent and that they
won’t be able to meet their commitments. Suddenly there was no money in the ATMs anymore. The
government decided unilaterally to take the responsibility for all the banks operating in the country.
Within 2 years Ireland needed to be bailed out by the IMF (International Monatury Fund) and the
European central bank. As a consequence the economy went into recession. In order to bail
themselves out the government introduced increased income tax rates and imposed new local taxes.

What do you think happened to the businesses?

Many retail employers went out of business and other ones cut salaries and had redundancy
programmes “your job is no longer here”. So the unemployment rate rose to 15% and many people
started to emigrate. All in all the government struggles on until 2011.

Reasons for economic crisis:

Government Spending: As I’ve already mentioned, Ireland got a lot of money and they spent it in a
very reckless way, their spending increased to 27bn € in 1998 this went along until the gross
spending topped 76bn € in 2008.

Taxation: Since Ireland decided to give very generous tax-free credits they now have some of the
highest marginal rates in OECD and the Irish are clearly not happy about this.

Building : Ireland made the mistake to build too many houses in a very short time period. So as the
housing bubble burst the majority couldn’t afford a house and this fact led to a huge loss in the
economy.

Banking: With the money Ireland got from other countries they lend it to the Irish to a nearly non-
existent interest-rate played a very important role too in the economic crisis. Since the banks who
lent the money to Ireland wanted their money back and Ireland didn’t have it they had huge debts.

Heading into 2008, Ireland faced four problems: runaway public spending, a screwy tax system, and a
housing market and a financial system that were effectively out of control. In late 2008, the global

Benchmarking : The objectives of benchmarking are (1) to determine what and where improvements are called for,

(2) to analyze how other organizations achieve their high performance levels, and (3)to use
this information to improve performance
financial crisis started. It was then Government policy made its fifth mistake: the blanket guarantee
of all bank liabilities. This effectively nationalised all banks overnight

http://www.telegraph.co.uk/finance/financevideo/8139029/The-Irish-crisis-explained-in-30-
seconds.html http://www.telegraph.co.uk/finance/financevideo/8139029/The-Irish-crisis-explained-
in-30-seconds.html

Benchmarking : The objectives of benchmarking are (1) to determine what and where improvements are called for,

(2) to analyze how other organizations achieve their high performance levels, and (3)to use
this information to improve performance