St. Patrick's Day Message: Ireland Isn't Greece
As large parts of the world turn green to celebrate St. Patrick’s Day, the Irish Prime Minister Enda Kenny has been flying the green, white and gold flag on a charm offensive around the world.
Kenny is packing in trips to London, China and New York within a couple of weeks in an effort to carry forward the country’s gradual return to economic health, which has been based largely on attracting foreign investment. He opens the New York Stock Exchange on Monday, after visiting at the White House over the weekend.
“This is a very important push for Ireland,” Irish businessman Barry Maloney, founder and general partner at venture capital firm Balderton Capital, told CNBC.
After the highs of the Celtic Tiger years, Ireland experienced the humiliating low of an 85 billion euro (then $113 billion) bailout by the troika of the International Monetary Fund, European Central Bank and European Union in late 2010.
Since then, the nation has emerged as a poster boy for austerity—although critics point out that unemployment still stands at 14 percent, emigration is rising as recent graduates leave, and internal growth has ground to a halt.
Still, the early adoption of austerity measures, and a 17 percent increase in foreign direct investment last year, have helped Ireland improve its competitiveness in a way other stricken euro zone countries, such as Greece, have not. Unit labor costs—once second only to Denmark in the EU—are down, and the 12.5 percent corporation tax rate, one of the lowest in Europe, is also helping to attract companies.
Big names such as Google, Twitter, and LinkedIn have arrived, and other multinationals including and Pfizer are expanding their operations.
Eric Schmidt, executive chairman of Google, when asked why the internet giant was opening an office in Dublin in 2011, said: “Our decision has nothing to do with the Irish economy and everything to do with the Irish workforce.”
As well as being relatively cheap, that workforce is well-educated, English-speaking, and has had enough of a scare that it’s prepared to work hard for less rather than get on a plane to Boston.
“Compared to other locations, the resilience and the spirit of getting on with things helps,” Dermot Clohessy, executive director at IDA Ireland, the agency that focuses on attracting investment to Ireland, told CNBC. “Everybody has knuckled down to the challenge.”
“We still have a long, long way to go and the government is probably talking it up beyond reality," Maloney said.
There have also been complaints about the lack of lending to small businesses by Ireland’s beleaguered banks. The Irish banking system is currently shored up by the government, which took the much-criticized step of guaranteeing deposits at the height of the crisis.
“Until lending to small businesses happens, we won’t have a recovery,” Maloney said. “The government is controlling the banking sector, but don’t seem able to get banks to lend to small businesses.”
Maloney argues that the influx of foreign investment, mainly from the U.S., will help Irish workers develop U.S.-style management skills and hopefully create a new generation of entrepreneurs.
“If you’re setting up in Ireland, you’re forced to think globally straight away because the home market is so small,” he said.