The European Union is experiencing considerable economic and political disruption, with Greece now more than even bleeding dry, and the European model undergoing an identity crisis. Against this gloomy context, Thierry Pouch, in charge of the Economic Studies Division at the Permanent Assembly of Chambers of Agriculture (APCA), takes a look at the economic situation of Ireland, the Green Eire, which, contrary to other member states, is currently regaining momentum following a five-year crisis marked by the deterioration of public finances and a three-year recession between 2008 and 2010.
One of the keys to the Irish success is believing in its agricultural potential, and especially supporting its agro-food exports, especially to China. We highly recommend this editorial1
that reminds us that focusing on agriculture is a powerful driver for growth and a weapon to prevent crises.
Agricultural policies must be part of the economic recovery thinking. At the European level, the implementation of concrete reforms is thus urgently required to meet the future challenges of agriculture. Because the current budget compromise only postpones the need for an efficient reform of the post-2013 CAP. In this context, momagri feels that another CAP is possible to improve European competitiveness and agricultural market operations.
momagri Editorial Board
Much has been said about Greece, Spain and Portugal since the outbreak of the euro zone crisis. The case of the Irish economy is less known. Yet, the country plunged due to the recession it experienced between 2008 and 2010 on one hand, and the deterioration of its current account balance on the other. While Spain and Greece are not reaching successful outcomes, Ireland is obviously restoring some economic growth. A successful exit from the crisis has even been mentioned.
The economic crisis had a harsh impact on the Irish economy. Support mechanisms to the banking sector generated a strong deterioration of public accounts that was aggravated by the three-year recession between 2008 and 2010. In fact, Ireland’s budget deficit in 2008 largely exceeded the 3 percent of GDP threshold to reach 7.3 percent. By 2010, the deficit approached the 35 percent of GDP, before backing down to 11 percent in 2011. As far as the public debt is concerned, it went from 44 percent of GDP in 2008––well below the 60 percent standard––to 105 percent in 2011. Following a continued decline from the early 1990s to reach full employment between 2000 and 2008, unemployment suddenly increased under pressure from the economic turmoil, and should reach approximately 15 percent at the end of this year.
The austerity packages had a severe impact on the population, especially younger people, prompting some to leave the country. Five years after the crisis, Ireland can see an economic upswing. Compared to the economic situations of the most vulnerable euro zone members, which are not successful in putting their finances in order, Ireland recently reaped the rewards of an economic policy based on three pillars. Among them, the impressive recovery of the balance of current operations must be noted. Because the euro zone crisis is often connected to competitiveness problems, going from a seven percent of GDP deficit in 2008-09 to a surplus of two percent in 2012 deserves attention.
The recovery of the Irish economy was based on the wage flexibility initiated as early as 2009. The ability of the Irish Government lay in the fact that, at the same time, inflation itself was brought under control to protect household purchasing power, and therefore the level of domestic demand.
By doing so, Ireland avoided the trap in which nations such as Greece or Spain fell into, i.e. a suicidal compression of demand, which also results in crushing growth drivers. Next, corporate income taxes remained very advantageous, since rates on business profits are among the lowest in the euro zone. Accordingly––and this goes back to the 1960s––Ireland is once again an attractive location for foreign investment. In 2011, the Irish economy pulled out of the recession, more rapidly than the other euro zone members most affected by the crisis.
Yet, this economic upswing still remains fragile. This is the reason why Ireland intends to implement other measures to speed up an exit from the crisis, and agricultural exports are among them. In fact, agro-food exports will be promoted to stimulate the Irish economy. The goal is to capture the Chinese market that is Ireland’s prime target for the years to come, due to the development of the Chinese population. In the afro-food sector, Ireland’s comparative assets are dairy products––especially infant milk––and beef.
As far as beef is concerned, Ireland and China have even initiated negotiations to find a solution to the Chinese embargo on Irish exports that was imposed in 2001 during the second stage of the BSE crisis, when China opened its market to Brazilian, Uruguayan and Australian beef.
Severely affected by the sovereign debt crisis, Ireland, along with France, provides an example of the contribution that the agricultural and food sector can provide to restart economic activities. Agriculture has not yet had its final say.
1 The full version of this article is available from the website of the Permanent Assembly of the Chambers of Agriculture (issue 322 of October 2012 of the Chambres d’Agriculture publication) at