Ireland’s rise to prosperity: The gains and pains

July 17, 2023 07:54
Photo: Reuters

When Ireland joined the European Union in 1973, it was the poorest member. Now it is one of the richest, with a per capita GDP last year double that of Britain. In 2022, its GDP grew 12.2 per cent, the fastest in the EU.

In May, the government announced the establishment of a Sovereign Wealth Fund (SWF), into which it will inject 60 billion euros. It expects to earn 65 billion euros in budget surpluses between now and 2025. The SWF will be managed by the National Treasury Management Agency and is modelled on similar funds in Norway, Japan and Australia.
One major factor in the GDP last year was high exports of pharmaceuticals and information and communication products.

Another was corporate taxes, which reached 22.6 billion euros last year, up from 15 billion in 2021, and are likely to exceed 26 billion this year. Ten multinationals, including Apple, Google, Microsoft and Meta, accounted for 60 per cent of the total last year. The rate of corporate tax in Ireland, 12.5 per cent, is the lowest in the EU.

An adviser to the government said that the Ministry of Finance wanted the SWF to prepare for a rainy day. “We live in uncertain times – a severe housing crisis, large pension obligations and an ageing population, uncertainty over how long we can keep low corporate taxes and threats to globalisation of which Ireland has been a major beneficiary. The housing crisis is the most severe. If the government used the money now, it would fuel inflation.”

Evidence of this new prosperity in Dublin are there for all to see. Bars, hotels and restaurants are bursting with customers, local and foreign. Their staffs come from all over the world – EU countries, China, Africa, India and Pakistan, Brazil and Bolivia.

Conspicuous are large families of Roma travellers from Romania, the women dressed in flowing white cheque skirts. Dublin people said they did not work and made their living from begging and theft and should be deported to their home country – but EU regulations do not allow this.

In June, a report of Eurostat, the statistical office of the EU, found that Ireland was one of the most expensive countries in the EU for household expenditure on goods and services. Prices for housing were 46 per cent above the EU average.

The most expensive properties are in Dublin, with an average price of 500,000 euros. Such is the price and scarcity that even middle class couples with two incomes cannot afford one.

On July 6, the Irish Times carried advertisements for houses in Ranelagh, a desirable district of south Dublin. The asking price for a three-bedroom home was 1.05 million euros and another with two bedrooms was 1.095 million euros. Both had 160 square metres.

“U.S. hedge funds and Chinese investors have bought many Dublin properties and rent controls are minimal,” said Luke Gibbons, a history professor. “Not enough homes are being built, especially social housing. In my thirties, my wife and I could buy a property but my children, who are professionals, cannot. We need to regulate the market more.”

The larger cause of today’s prosperity is Ireland’s entry into the EU in January 1973. As the poorest member, it was entitled to many subsidies, especially for agriculture, the largest sector of its economy at that time. From 1973 to 2018, Ireland received over 40 billion euros in EU funds. Since 2018, it has become a net contributor because of its prosperity.

In addition to transforming the lives of thousands of farmers, the funds also paid for major infrastructure projects, such as motorways, the Dublin Port Tunnel and the Dublin Area Rapid Transit system.

Britain’s decision to leave the EU in June 2016 has further boosted the economy. Between 2016 and 2021, Dublin attracted 135 new financial companies, equal to one quarter of Brexit-related moves, by firms who wanted to remain within the EU.

The arrivals included Bank of America, Citi and JP Morgan, which purchased a new office of 12,000 square metres in the Docklands area of Dublin, with space for 1,000 employees. Ireland offers a highly educated, English-speaking workforce and sophisticated financial infrastructure, in addition to its low corporate tax rates.

In 1972, no-one in Ireland could have imagined this dramatic outcome of EU membership.

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A Hong Kong-based writer, teacher and speaker.