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Ireland: Real recovery or all blarney?

The Irish economic rebound from euro zone pariah to poster child is now almost so extensively written about as to be clichéd.

The cost of Irish borrowing has plunged to less than 3 percent on its 10-year bonds – close to the levels enjoyed by neighboring U.K. - and the country has exited its bailout by international lenders. It has already raised more than half the money it needs this year.

Household name companies like Google and Twitter have their European headquarters there, lured by the country's low corporation tax.

And even real estate -- the very sector whose collapse forced the country to ask for a 85 billion euro ($114 billion) bailout – seems to be rebounding.

So why then did GDP fall by 2.3 percent in the last quarter of 2013, just as the champagne and Guinness was flowing for the bailout exit?

(Read more: Irish economy in shock 2.3% decline in fourth quarter)

In contrast, the euro zone as a whole grew by 0.1 percent in the same period.

In this specific quarter, there were issues with Irish-based pharmaceutical companies like Pfizer losing patents on medicine like Viagra. Worryingly, domestic demand shrank by 0.1 percent last year, suggesting that the average Irish person is not confident in the recovery.

Brian Hayes, a minister at Ireland's Department of Finance, defended Ireland's economic performance in a conversation with CNBC. "The quarterly data is quite volatile and much of the reduction is down to the patent cliff in the pharmaceutical industry," he argued.

Beyond this, there is a tale of two Irelands emerging, and nowhere is that more evident than in its property market. Reckless property lending by banks, and the government's promise to bail them out, led to Ireland's bailout in the first place.

After this bailout of the banks, Ireland's public debt soared from 25 percent of GDP to over 123 percent, its economy endured two recessions in five years, and unemployment soared to 15 percent. The government embarked on an austerity drive which saw welfare benefits slashed and public servants' pay cut.

(Read more: Grand! Irish bondmarkets cheer rating upgrade)

Now, the Irish state is selling off some of the properties and loans it had to take on when it bailed out failed banks. There's plenty of international investment interest in these and the agency which is making some of the sales – NAMA – has stepped up its program of sales by more than 3 billion euros this year. Funds like Lone Star, Blackstone and Kennedy Wilson are involved.

Aidan Crawley | Bloomberg | Getty Images

"We are taking clients to Dublin as well as London when they are looking for investment opportunities," Andy Tallon, associate director, Ireland & UK debt & structured finance at commercial real estate company CBRE, told CNBC.

"There's a lot of international interest in transactions, whether in real estate or loan books."

Much of what has been sold from these portfolios so far is U.K.-based.

What's generating interest in Ireland is prime Dublin commercial real estate, the kind of offices where a Google might want to base themselves. Meanwhile Dublin house prices have also started rising again, and were up by around 17.5 percent in 2013.

Sources in the property industry say that they are organizing international investors day-trips to Dublin when they come to look at London property.

Outside Dublin, the story is very different, however.

(Read more: Ireland's bailout exit feted by bond markets)

The ghost estates which litter the countryside, housing estates which were often only part-built, are still lingering, many owned by banks or NAMA after their owners went bust. Some will be assigned to social housing; many will be knocked down; more will be repossessed if their owners' mortgages are called in. Prices only rose by 0.1 percent last year outside Dublin, and that is at a time when these lower-grade properties are being kept off the market.

These houses, which might once have been starter homes for the hundreds of thousands of mostly young people who have emigrated since the crisis began (including 89,000 people in year to April 2013), are a potent symbol of how much of Ireland is not benefiting from the so-called recovery.

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