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Economics of Ireland

Student’s Name

Institution Affiliation

Professor’s Name

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One of the most important parts about the recessions that Ireland faced in the past and

current times is that it was a severe recession. Usually, recessions affect only some sectors of

the economy and not others. The 2008-2012 recession did not just affect all sectors but spread

across the entire economy. Although economically tricky at this time, if it were more

moderate or less severe, it would not be a relevant lesson to be learned from in Ireland's

economic future.

In 1995, the Government passed legislation allowing banks to offload Irish sovereign

debt onto the Irish stock market. The Government also committed to issuing State bonds

which spread risk across a wider share of society and pushed house prices up before they

could go down. Faulty business practices during times of prosperity lead to economic crises

later on. When the Irish economy was growing rapidly, many business people and banks used

credit cards to conduct their transactions. Many Irish citizens also did this because they saw it

as the right thing to do. However, during recessionary times, people tend to revert to their

traditional spending habits and do not spend money on the "nice things" they would typically

buy. This causes a massive problem for businesses and companies because they will not

make enough money to pay for all their expenses, which can lead to bankruptcy (Mazeikaite,

O’Donoghue, & Sologon, 2019).

Ireland's gross domestic product (GDP) growth dropped from 7% in 2007 to -3.6% in

2009 due to the global financial crisis, which also contributed to double-digit unemployment

figures (Ryan, 2013). The worldwide recession had a detrimental effect on international

direct investment, the export and import of goods and services, and individual consumers'

levels of discretionary expenditure as well. Because of the economic downturn, Ireland was

forced to confront formidable obstacles in terms of unemployment that the country had never

experienced before (Ryan, 2013). The labour force participation rate declined from 77% in

2007 to 73% in 2012, which indicates that people searched for employment possibilities in
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other places (Ryan, 2013). The unemployment rate jumped from 4% in 2007 to 14.7% in

2012, with the rate of unemployment among young people reaching as high as 50%. (Ryan,

2013). In general, the financial instability that pervaded the global economy was a primary

contributor to the economic downturn, along with a number of other issues, one of which was

the construction of nuclear reactors.

In order to avoid significant economic recessions in Ireland, it is essential for us to look

at what happened and use these lessons. The 2008-2012 great recession in Ireland was caused

by a number of factors, including the housing market bubble, fueled by easy credit conditions

and irrational exuberance, the global financial crisis, a banking system that was highly

leveraged and vulnerable to a sharp increase in defaults, fiscal policy that was overly

expansionary during the good times, leading to large budget deficits and the European debt

crisis. While it is difficult to predict when another major economic recession may occur, there

are a number of lessons that can be learned from the mistakes made in the last recession in

order to help avoid or mitigate the effects of another one in the near future.

Two key lessons that can be learned from the Great Recession are the importance of

maintaining a diversified economy and the importance of fiscal responsibility. It is crucial to

maintain a diversified economy to prevent another economic crisis like the one that occurred

during the Great Recession. Prior to the onset of the recession, the Irish economy was

excessively dependent on the building industry as well as the financial services sector. After

the downfall of these industries, the Irish economy was left in a position that was highly

precarious. It is essential to make sure that the Irish economy is diversified so that it is not

unduly dependent on any one industry to reduce the likelihood of a scenario like this

occurring in the future.

In order to prevent another severe economic recession, fiscal restraint is also crucial. In

the midst of the Great Recession, the Government of Ireland racked up significant budget
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deficits in an effort to kickstart the country's flagging economy. Nevertheless, this fiscal

stimulus was not viable over the course of time, which ultimately resulted in the Irish

Government being forced to seek a bailout with the European Union and the International

Monetary Fund. It is essential for the Government of Ireland to live within its means and

steer clear of amassing significant budget deficits if it wants to prevent a scenario like the

current one from reoccurring in the future.

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References

Mazeikaite, G., O’Donoghue, C., & Sologon, D. M. (2019). The Great Recession, financial

strain and self-assessed health in Ireland. The European Journal of Health Economics,

20(4), 579–596.

Bielenberg, A., & Ryan, R. (2013). An economic history of Ireland since independence.

Routledge.