The Economist pronounces:
It is true that Ireland will not soon pull itself from the economic bog. Recovery will be slow at best, particularly if an inflation-wary ECB starts to jack up interest rates. Unemployment is likely to stay in double figures for some time. Some fear that the cost of servicing the debts to the EU and IMF, and of feeding the insatiable maw of the banks, will eventually force Ireland into a debt restructuring. This would be a terrible blow to a country desperate to believe that the worst is over.
Yet Ireland is not about to return to the dark days of the 1980s. Numerically, the recession has sent living standards back only to the levels of around 2002 (see chart 2). The flexible economy will remain attractive to multinationals seeking a toehold in Europe, especially if it keeps its low corporate-tax rate. Domestic demand is still depressed—a big concern. But unlike other troubled euro-zone countries, Ireland is regaining competitiveness by reducing unit labour costs. Exports are booming, and there should be a current-account surplus this year for the first time in over a decade. The demographic outlook is favourable. “There are no brakes to growth if we can get this thing going,” says Danny McCoy, head of the Irish Business and Employers Confederation.
At least as important, despite the fog of gloom sitting over the country, Ireland has much to be proud of. Not all the gains of the Celtic Tiger years were squandered. An optimistic, entrepreneurial spirit emerged that will not be crushed by a few years of recession. Higher education has expanded dramatically—30% of Irish students are the first in their family to attend university—as has the labour force. A generation has grown up knowing nothing but prosperity. This accumulation of expectation and experience makes Ireland a very different country from the weary, fearful place of the mid-1980s.
Perhaps the most hopeful future for Ireland lies in becoming, for the first time, an ordinary small European country, with a properly functioning democratic system and a stable, diversified economy. But first it must begin to see itself with sober eyes. Kevin Gardiner of Barclays Wealth, who coined the phrase “Celtic Tiger” in 1994, says that Celts have a nasty habit of extrapolating both good and bad times for ever (as a Welshman, he dares to make such generalisations). Just as the Irish suffered a bad bout of irrational exuberance in the boom years, they have now been overcome by excessive pessimism. Or, as Anne Enright, the novelist puts it, “Ireland is a series of stories it tells itself. None of them are true.”