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Emmet Oliver

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Ireland Is Not Greece and Greece Is Not Ireland as European Crisis Rumbles On

Posted: 06/22/2012 3:24 pm

For Americans observing the interminable European debt crisis, all must seem very strange even after months of special programs, learned editorials and on-the-spot reporting from Athens.

At a fundamental level, Americans must wonder how a faltering economy in Greece (population: approximately 11 million) can cause a rupture in the entire economic foundation of the eurozone, which is supported by a population of 332 million.

Don't worry, we all ask ourselves this question from time to time.

For Americans it would be the equivalent of the US economy coming dangerously close to a financial meltdown on account of a budget crisis in Columbus, state capital of Ohio. It is -- on the surface -- that strange.

But what helps to explain the current causes of the crisis to an American audience, in particular, is to look at little closer at the countries involved and reflect upon how utterly different they are.

Once one realizes how different they are economically (not to mention culturally and socially), one gets a better sense of why arriving at a pan-European solution to the current problems is proving so difficult for policy makers.

Take the four countries that are currently either in lending programs or scheduled to enter a IMF/EU lending program (including bank aid) -- Greece, Portugal, Ireland and Spain.

These countries unfortunately are often grouped together under various umbrella terms -- PIGS, Club Med economies or plain ole "bailed out'" states.

But it can be argued that apart from geographical proximity (Spain and Portugal, for instance) and high public debt burdens, there is more to separate them than to unite them as economic entities.

Here in Ireland, this is most certainly the case.

Ireland found itself seeking outside assistance in many ways because of its banking problems, whereas the curse of Portugal in recent years has been extremely low economic growth. Greece, on the other hand, has suffered due to an unsustainable stock of public debt.

Ireland's economy structurally could not be more different than that of Greece, Spain or Portugal, yet constant media comparisons are made among these countries. For example, Ireland's exports represent 106% of GDP (data from Datastream for 2011), whereas the respective figure for Spain is 30%, Portugal is 35% and Greece is 21%.

The contrasts are even starker for outside investment, particularly from the US. Ireland's mobile Foreign Direct Investment (FDI) as a proportion of its economy is massively larger than that of Spain, Portugal or Greece, and that is even after the last two years of drama in Brussels and elsewhere. (IDA, the organization which won that investment, remains upbeat about this year too.)

Ireland's openness as an economy means similarities with Greece are misplaced and the model in Ireland is arguably more similar in inward investment terms with that of Singapore, Israel or Switzerland.

In recent figures noted by FDI Intelligence (the foreign investment news wire owned by the Financial Times) Ireland has kept its strong pipeline of foreign direct investment in the last 12 months despite significant market turmoil. Recent project wins for Ireland have included PayPal, Hewlett Packard, Microsoft and Eli Lilly, and all of these won in the teeth of the raging debt crisis.

With these countries so different, sometimes "one size fits all" tax and banking solutions sit uncomfortably with member states. For example, here in Ireland the government is totally opposed to the harmonization of taxes on corporate profits. However, Ireland is very much an enthusiastic European member and wants to remain in the eurozone at all costs.

Either way, while it is deeply frustrating and time consuming, the particular differences within Europe will have to be accepted by Americans if they want to get a true and full understanding of these currently volatile events.

Emmet Oliver is chief communications spokesman for IDA, Ireland's foreign investment agency.

 
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