Eurozone officials do not have much good news to trumpet, so perhaps we should forgive them for attempting to spin the Irish crisis.
Ireland just returned to the debt markets for the first time since its 2010 bailout and sold bonds for yields lower than those for Spain and Italy. If you’re a banker who was holding Irish bonds, this is certainly excellent news. The Irish worker has yet to receive similar good tidings.
German Eurozone marching orders complete with budget cuts, tax increases and full frontal bank-bailouts, Ireland has managed to improve its short-term fiscal position but at the expense of economic stagnation for the foreseeable future and a poor long-term fiscal outlook.
Irish GDP growth has fallen off a cliff since the GFC. Between the inception of the euro and 2008, Ireland grew over 5% a year. Since then, the country has averaged over a 1% yearly decline:
The new normal in Ireland will create difficulties in reducing the unemployment rate. While this rate has dropped from 15% to 14.1%, most of this reduction is the result of the Irish emigrating to more robust economies. The true labor picture is dismal with over 300,000 fewer workers in 2013 than in 2008.
Dismal economic growth will continue to squelch employment and keep a lid on tax revenues. With large budget deficits for the immediate future, Ireland’s debt to GDP ratio will continue to rise.
So, if you’re a bank or a speculator who has purchased Irish debt, then troika bailouts and Irish austerity have been very good to you, not so much for the Irish worker and taxpayer.