Austerity-hit Ireland is poster boy for euro bailout success

(DUBLIN) - Hammered by austerity measures a year after a massive EU-IMF bailout, Ireland is now being hailed as a eurozone poster boy for the way it is coming to terms with the consequences of its boom to bust.

As the government implements cuts and tax hikes under its bailout programme, German Chancellor Angela Merkel has praised Ireland as a "superb example" of how a country can work its way out of a debt crisis.

In November last year, Ireland was forced to seek an 85-billion-euro ($119 billion) EU-IMF rescue package to deal with massive debt and deficit problems.

The country was still reeling by the time of February's general election when Enda Kenny swept to power at the head of a coalition of his centre-right Fine Gael with the Labour party.

Kenny inherited the straitjacket of a multi-year fiscal austerity plan negotiated with the previous government of Brian Cowen's centre-right Fianna Fail and the Greens.

Despondency would have been an easy option, Kenny admitted, but insisted "that is not my way" as he set about dealing with a national debt that had ballooned, an enormous budget deficit, rocketing unemployment and -- as he put it -- a banking sector "in disarray."

Living standards plummeted and property and banking meltdowns wiped out billions of euros in personal wealth after Ireland's so-called Celtic Tiger economy crashed.

Yet the protests that have hit other struggling eurozone countries have been largely absent here.

The lack of demonstrations despite the squeeze is part of Ireland's recent political culture, according to academic Michael Marsh, of Dublin's Trinity College.

"The puzzle is why are people so quiescent? I suppose people just have the feeling that we are in a mess. I think people recognise we are in a mess," he said.

"What's a protest going to do? It's going to move the deckchairs around."

Marsh also said private sector unions were never strong and the more militant public sector unions were "bought off" under a 2010 deal that promised no compulsory job losses and no pay cuts until 2014 in return for flexibility and reform.

While Irish anger has failed to boil over, there is widespread despondency, not least about the way the EU hierarchy is coping with the eurozone crisis.

A recent poll showed 55 percent of voters were dissatisfied with the bloc's leadership although 67 percent still wanted to be part of the EU.

The poll also revealed there could be difficulties ahead if the EU plans changes to treaties to deal with the fiscal crisis.

Some 47 percent said they would vote 'No' in a referendum -- and Ireland has past form in sending shockwaves through the EU, having had to vote twice before it passed both the Nice and Lisbon Treaties.

While Ireland now forecasts a modest recovery with 1.6 percent growth next year, the biggest losers are the 430,000 jobless. Unemployment has soared to 14.4 percent from less than four percent at the boom's height.

"These are chilling figures and a chilling commentary on the failure of the austerity programme that was supposedly designed to save us," said Irish Congress of Trade Unions chief economist Paul Sweeney.

More pain is coming next month with a further budget savings of 3.8 billion euros in spending cuts and tax hikes aimed at reducing the public deficit to 8.6 percent of Gross Domestic Product.

Sweeney said the austerity measures were "killing the patient and smothering any prospect of a recovery."

With domestic demand flat, the brightest prospect on the horizon is a strong export performance -- but there is concern the chill wind of a global trade downturn may hit this route to recovery.

John Whelan, chief executive of the Irish Exporter's Association, says helping indigenous industry exports is the quickest way to boost growth.

The three main sectors driving exports are chemicals and pharmaceuticals, information communication technology (ICT) and agri-food and drinks.

"At the beginning of the year, exports moved very rapidly as world trade bounced back," Whelan said.

"Halfway through the year we were anticipating that in the full year we would see a seven-percent growth in exports. The slowdown in the European economies in particular has been a significant worry and a dampener.

"However we still anticipate that we will finish the year at approximately five-percent growth."

Whelan said if Ireland could grow its exports by five percent a year by 2016 it will have created 300,000 jobs.

The 2011 exporter of the year, ABC Nutrition in Shannon, western Ireland, is an example of the sort of small firm the government is encouraging to boost export-led growth.

The manufacturer of a range of sports and health nutrition products was set up three years ago by food technologist Wille Wixted, 36, and already exports to 11 countries.

He employs 10 staff and expects to hire three more next year and to have annual turnover of over five million euros, with some 83 percent generated by exports.

Wixted said the global downturn had not hit sales so far.

"A very large company in our area will go up and down with the market whereas we are a small company so we can box clever and capture new bits of business."