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Ireland's euro commitment tested by emigration and endless austerity

"Ireland will again stand as a full member of the euro zone," said Enda Kenny, the Irish Prime Minister, as he gave his fellow citizens a collective pat on the back for making Ireland the first nation to successfully exit an EU bailout program. Instead of celebration, however, he gave warning that graduation from the sick bay to the recovery ward did not entitle the Irish to more helpings of pudding. Austerity will continue for the Irish for years to come; a sharp contrast with Germany where the new coalition government is promising a program of rampant spending, a reduction in the retirement age and more and bigger snacks for everyone.

Small wonder that so many Irish are giving up and seeking their fortunes elsewhere. Since the financial crash almost 400,000 have emigrated and in the year to last April, 89,000 people quit Ireland, about 10 every hour, a dramatic outflow in a country of just 4.5 million inhabitants. Most head for the obvious destinations – America, Canada, Australia – but there is also a small trickle to Germany of IT and other workers where specialist technical skills matter more than linguistic competence.

If these emigrants can hope to find work it is because of Ireland's heavy investment in education and, more importantly, on-the-job training provided by foreign corporations lured to Ireland over the last 15 years by fiscal incentives. Ireland's low corporation tax rate remains intact, despite the protests of the European Commission that it amounts to unfair subsidy. It is Mr. Kenny's only hope of restoring employment, which is already showing some positive signs of improving, the rate of joblessness falling recently to 13 per cent from 15 per cent.

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That doesn't take into account the thousands who quit the dole queue with a boarding pass for a flight to Boston or Toronto. With the highest birth rate in the EU as well as the highest emigration, Ireland's biggest contribution to Europe might be its people, if the EU's internal economy was not completely dysfunctional and subject to tribal and nationalist politics.

Consider Germany, a nation with a rapidly shrinking work force and a birth rate of only 1.3 per female. The working age population is shrinking by 100,000 per year, creating a vast pension burden for those joining the labour force. Yet, in a sop to its new coalition partner, Angela Merkel has agreed to reduce the retirement age to 63 and introduce spending programs that will enlarge the federal budget by €20-billion ($29-billion), a strange policy shift for Europe's most powerful nation – one which has been loudly preaching restraint.

The Irish will learn, if they didn't know it already, that being a "full member of the euro zone" doesn't mean an equal member. It means living with an overvalued currency, an inappropriate interest rate and within a "union" which is now learning to become intolerant of economic migrants. Ireland has suffered five years of punishment for its decade of profligacy – far too long – mainly due to the burden of the euro. Its only hope in reversing the dramatic fall in Irish employment, wages and living standards is foreign direct investment but it will soon find itself once again fighting a battle with Brussels over tax subsidies.

In the discussions that will no doubt soon begin in Brussels over deficits, unemployment and deflation, Mr. Kenny might point to Ireland's vanishing work force and ask the commission, what is the point of the euro zone if so many choose to leave.

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About the Author

Carl Mortished is a Canadian financial journalist and freelance consultant based in the U.K. With a career spanning investment banking, journalism and consulting for global companies, he was for many years a financial writer and columnist for The Times of London. More


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