IRELAND doesn’t have the ability to run an economy within the euro but can’t pull out, according to economist Jim Power, who spoke at last Friday’s Shannon Development conference in Limerick.
Mr Power, who is chief economist with Friends First, said he hadn’t favoured joining the single currency in the first place.
“I would have been very sceptical about Ireland’s participation in the euro back in the late nineties. I believed it was going to create an inflationary bubble and I didn’t believe the government of Ireland would be capable of managing an economy in a monetary union and I think that has been borne out.
“We’ve had serious policy errors over the last decade that have made our life very difficult but to suggest that we should leave the euro at this stage does not make sense; it would be a recipe for disaster. If Ireland left the euro in the morning we would become Iceland in six hours; it’s not an option.”
He was also critical of the public sector protests that took place on the same day. “I think it’s a recipe to make things an awful lot worse. What will they achieve? I don’t think they’ll achieve anything. The country is effectively bankrupt; we’re borrowing €480 million a week to run the country, that is not a sustainable situation.
“To suggest that we can postpone the corrective action is mad because we’re adding close to €500 million a week to the national debt and within two or three years that will result in a situation where most tax revenue will go to servicing the national debt. That is not a sustainable economic model, the Government has no option but to cut back spending quite substantially over the next two or three years. If it doesn’t do that the economy is not going to recover.”
Pressure from the EU is actually in Ireland’s interest, he feels. “There is an outside agent pulling a lot of the strings here, that is the European Commission and the European Central Bank, they are basically funding the borrowing requirement in the country at the moment through the banking system.
“The European Commission is forcing the fiscal consolidation. We have given a commitment to taking the borrowing requirement down to 3% of GDP from 12% this year by the end of 2013. The EU is really becoming increasingly involved and I think that’s a good thing, because if the domestic political system is not capable of doing it, and I don’t believe it is, then external influences are very necessary.”
Fear of outside agencies copped the Government on in the eighties, and began the boom, he added. “It was the spectre of the IMF back in 1986 that brought the political system to its senses and forced the changes that were made in 1987 that sowed the seeds for the Celtic Tiger.”
Regional development was the theme of the Shannon Development conference and Mr Power said it was neglected during the Celtic Tiger years. “One of the features of the last 10-15 of Ireland’s economic development is that the growth performance was not spread widely. Dublin and the Mid-East region did significantly better than the rest of the country and that’s a pity because in a small country you can’t focus most economic activity on one small region.
“It’s absolutely essential that we try and spread regional growth and development. Some progress has been made, the National Development Plan is delivering a much better infrastructure here in Limerick for example.”
He said that the Mid-West has a lot to offer. “It has a number of agencies that are very proactive in trying to get the region moving. It has a very high quality education offering and it has an airport on its doorstep. The Mid-West has a lot going for it but the challenges nationally and at a regional level are immense. The key message that is coming through, against a background of economic crisis, is that the answers are not going to come from the top, they’re going to come from a local level. I think local communities around the country are going to have to work for their own regions and in a sense it’s every man for himself at this point.”
Mr Power feels the Government have to use its Aer Lingus shareholding for the good of the Mid West, and says it must prevent the loss of its Shannon/New York service.
“I don’t think it should be allowed happen, it would be disastrous for this region, particularly from a tourism point of view. Tourism has to be a key part of the solution to the economic problems in this region and the loss of it would be a disaster. The Government cannot stand back and allow it happen. The Tánaiste this morning was talking about the support that will be given for regional development, well if the Government stands back and allows Aer Lingus to do these things it’s not in the best interests of this region.”
He criticised the Government’s handling of the Heathrow debacle, and said it must be asked what it has a shareholding in Aer Lingus for if its not going to use it in the national interest.
“I believed when Aer Lingus announced they were taking the Heathrow slots from Shannon that it would be a disaster for the region and I felt that as a shareholder in Aer Lingus the Government should have had a much stronger voice and prevented it from happening. I thought the Government did abdicate its responsibility.
“It owns 25% of it and it should be ensuring that Aer Lingus is working in the best interest of the economy and particularly the regional economy. You just ask yourself if they’re not going to use the power given by that shareholding then why have it in the first place?”

Tánaiste reassures Shannon Development

THE McCarthy Report recommends stripping Shannon Development of its functions and assets, but Tánaiste and Minister for Enterprise, Trade and Employment, Mary Coughlan offered some reassurance when she visited the Mid-West last week.
The Tánaiste attended a conference entitled ‘Dynamic Regions-Future Directions in Regional Development’ a conference organised by Shannon Development, held in Thomond Park last Friday.
While she acknowledged that the State’s spending would have to fall, she said that she wants Shannon Development to continue operating.
“A €4 billion saving is the figure that the Cabinet have set down. On the issue of Shannon Development you are probably aware that there have been changes since I was appointed, they have streamlined the organisation under the chairmanship of John Brassil. I’ve given them (Shannon Development) additional work to do in relation to the task force and I still feel they have a very valuable contribution to make.
“In relation to regional development they have performed very well and it’s not without its challenges. I see a greater role for Shannon Development,” the Tánaiste said.
She did acknowledge that the relationship between the regional development body and other agencies might need tweaking. “Although we have an informal collaboration between Enterprise Ireland and the IDA we have to see if there are ways that could be changed and those discussions have been ongoing. The work of Shannon Development has been superb and we may have to look at different ways of doing things, but my view is it will continue to have a valuable role.”
It has been claimed that there has been very little progress on implementing recommendations made by the task force, set up following the job cuts announcement by Dell this year. Ms Coughlan said that all recommendations made couldn’t be acted on, but that the Government was taking action.
“A lot of the recommendations in the interim report are ones that have national implications for example, competitiveness. We have seen a turn around in our competitiveness, we have reduced costs and there’s a lot more to be done. In 2002 and 2003 we had a competitive edge and we’re reverting back to that competitiveness and that work is ongoing.
“I had a meeting with the chief executive and chairman on a number of items and if we could get those addressed and delivered to the West it would be important. We don’t have the wherewithal to implement every recommendation that is there; some of them are a framework that isn’t unique to the West of Ireland. I will be working with my colleagues to bring together two or three items that need to be addressed here.”
She disputed Ryanair’s claim that the €10 air travel tax is causing massive damage to Irish tourism.
“As an island nation we would like to see competition in aviation and we have three main companies, Ryanair, Aer Lingus and Aer Aran. Ryanair are making decisions on their profitability and they’ve always been of the view that the €10 tax is a disincentive to people travelling, we may not necessarily agree with that.
“I know from meeting with the Minister for Tourism that we’re looking at initiatives to attract people here because we’ve seen a reduction of 12 to 14% in the number of people coming from the North and the UK, not as many from the US, but we have to package what we have and provide very good value for money.”

Helping the country through many crises

SHANNON Development has a long history of helping Ireland get through crises, chief executive Dr Vincent Cunnane claimed at the regional development company’s Dynamic Regions conference, held in Limerick last Friday.
“As Ireland’s only regional development agency that is grounded in a single region, Shannon Development has been devising a range of imaginative solutions to combat major crises since its establishment by government in 1959. Throughout those 50 years the economic environment we’ve faced has included booms and busts and required innovative thinking and action and a large amount of risk taking,” Dr Cunnane said.
National policy alone won’t bring Ireland out of recession, he believes. “It is my belief that strong regions are essential for national economic recovery. Creating the necessary competitive environment to achieve regional economic development is as much about local endeavour and partnership as it is about national strategy. Shannon Development has always recognised the importance of a partnership approach and it has forged a number of key partnerships at local, regional and national level to help deliver regional growth. The work Shannon Development is doing is complementary to the Government’s strategy on building Ireland’s smart economy.”
Ireland still has a high proportion of people living in non-core areas, and that needs to be remembered, he said. “There have been many significant changes in the economic environment at global, national and regional levels. The economic landscape we now face requires planning of a different nature and scope to position ourselves for the recovery, which we know will happen. Around 40% of Ireland’s population live in rural areas and that is a high proportion by European standards and we believe that an increased emphasis on regional action will speed Ireland’s recovery.”
Shannon Development has a history of innovation since its earliest days and steps it took decades ago are still having a positive impact in the 21st century, according to Mr Cunnane. “The first challenge we faced in the late 1950s when jet planes no longer needed to stop to refuel at Shannon airport. Shannon Development was faced with the challenge of pulling those planes down from the skies. In response to that the company came up with a number of world firsts for which it became renowned and delivered a whole range of innovative programmes with a two pronged approach: to give industrialists reason to locate in the area and to give tourists reason to holiday here.
“One of those initiatives was the establishment in 1960 of the world’s first duty free zone, the Shannon Free Zone. That today still employs over 7,000 people in over 100 companies. It’s the largest multi-sectoral business park outside Dublin and generates annual sales of over €3.5 billion.”
He also said that the banquets in Bunratty go back decades and are still attracting visitors today.
Dr Cunnane said that work on a new five-year plan is underway and there are plans to use the region’s natural resources. “An area high on Shannon Development’s radar is the problem of future energy supply. Securing Ireland’s future energy needs is critical and Shannon Development is working to secure a €500 million Shannon Liquified Natural Gas project for the Kerry Deep Water Zone at Ballylongford. The project has the potential to provide up to 60% of Ireland’s gas needs into the future.
“This particular region has a lot of resources for the new economy, emerging around tidal energy and biomass. We’re lucky in this region to have these natural resources that will translate into new clean technologies and the intellectual capacity through UL and NUI Galway to bring those to reality.”