TOPICS > Economy

Ireland’s Woes: Onetime Celtic Tiger Now ‘Nation of Beggars’

December 7, 2010 at 5:43 PM EST

TRANSCRIPT

JEFFREY BROWN: Next: the Irish debt crisis and its fallout.

Today, the country’s finance minister unveiled one of the toughest budgets in Ireland’s history. We have a report on what brought the country to the economic brink. It comes from Emma Alberici in Dublin for the Australian Broadcasting Corporation.

EMMA ALBERICI: It’s been among the most dramatic weeks in Irish history. The country’s economy, once the envy of Europe, is now on international life support. The prime minister, busy cutting wages and lifting taxes, is being cast as the Grinch who stole Christmas.

ALAN BARRETT, Economic & Social Research Institute: Given the sort of suffering that people are now enduring through higher unemployment, wage cuts, tax increases, emigration, all the difficulties that people are having inflicted on them, there is a — sort of a clearly identifiable group of people who are at fault. And that is the government.

EMMA ALBERICI: Over the past five years, the Irish government became enamored with property. Developers were given tax breaks, and banks were encouraged to hand out loans worth 100 percent of the price tag. Construction took over all other industries to become Ireland’s number-one earner.

JOHN KILLANE, unemployed: You have that house there occupied. That one is empty. Both of those houses are empty as well.

EMMA ALBERICI: When John Killane and his family bought into this development two hours outside Dublin, the developers promised there would be a children’s playground and child care center on site. Three years later, the builder is bankrupt, and this is what they now call a ghost estate.

Most of the houses aren’t finished. Less than half of them are occupied. There are no streetlights. The lampposts don’t have globes in them. They’re not even wired up.

JOHN KILLANE: All these houses are gone. They knocked them down and just put grass over it.

EMMA ALBERICI: What’s the idea about knocking them down?

JOHN KILLANE MAN: Knocking them down because they can’t afford to finish them.

EMMA ALBERICI: John Killane and his wife both lost their jobs earlier this year, joining an unemployment queue that already represents 14 percent of the work force.

SINEAD KILLANE, unemployed: I think they just got so engrossed in one thing only, was construction, just build, build, build, easy money, quick money. Like, you didn’t even have to have a qualification to be a builder.

ALAN BARRETT: Because prices were going up, people always felt that building a house to sell on was, in a sense, a one-way bet, it meant then that houses were built all over the country, very, very often in places where employment prospects were essentially zero. So, again, this was just a disaster waiting to happen.

EMMA ALBERICI: When the property bubble burst, Ireland’s banks declared themselves broke.

With one in 10 families no longer able to pay mortgages on homes that were wildly overpriced, Anglo Irish debt is now rated at junk status. As the government tried to plug the hole in the banks’ finances, its own budget became stretched. According to Eurozone rules, it should be no higher than 3 percent of gross domestic product, but it’s actually more than 10 times that, at 32 percent.

LOUISE O’REILLY, Services, Industrial, Professional and Technical Union: People are very, very angry with this government. They’re very angry that the eyes of the international world are focused on our country at the moment for all of the wrong reasons.

EMMA ALBERICI: Protesters took to the streets as the prime minister addressed the Irish people, first to tell them that there was no money left in the banks or the treasury, then to tell them that they would each have to contribute roughly $5,000 over four years to help fix the problem.

LOUISE O’REILLY: They are allowing the most vulnerable in our society, the people on minimum wage, the people who depend on public services, they’re left then to fend for themselves, while they move heaven and earth to protect the banks.

EMMA ALBERICI: So, how did it go so wrong, boom to bust in just three years? When Ireland joined the European Union and then the single currency, investors’ eyes were fixed on this so-called Celtic Tiger.

It offered them the only English-speaking educated work force in the Eurozone, but, more important than that, it gave them the lowest corporate tax rate in the developed world. At 12.5 percent, it’s less than half the rate in Britain and much lower than Australia’s 30 percent.

FERGAL O’BRIEN, Irish Business and Employers Confederation: You’re here in the heart of Dublin’s financial center. Most of the buildings behind us, they have really been built in the last 15 or 20 years. And they’re now home to what are all the world’s major financial services business. So, most of the top 10 major global players in financial services are all placed here in Dublin.

EMMA ALBERICI: Fergal O’Brien of Ireland’s chief business lobby believes it’s foreign investment, like technology and financial services, that will help resuscitate the Celtic Tiger.

But France and Germany say that a low corporate tax rates gives Ireland an unfair advantage. They want the government to lift the rate to help pay for the bailout.

FERGAL O’BRIEN: Any increase in the corporation tax rate would actually be completely counterproductive to what the European Commission and the IMF are trying to do in terms of correcting the problems in Ireland’s public finances. We don’t have a hole in our corporate tax revenues. We actually have very strong corporate tax revenues.

Ireland would have to become a higher-tax country, not in terms of its corporate tax, but in terms of broadening its tax, in terms of having taxes on property.

EMMA ALBERICI: Sinead and John Killane are pondering their future. They can’t pay their mortgage, but, if they leave, where will they go?

JOHN KILLANE: Now we are a nation of beggars. As far as any Irish person, any Irish people that really sit back and think of it, they have made us a nation of beggars.

EMMA ALBERICI: The international bailout won’t help families like the Killanes, and it will come at a price that some are convinced the government won’t be able to afford. The interest bill alone is expected to cost $7 billion a year.

GWEN IFILL: The budget proposed today includes higher income taxes, pension reductions, fewer welfare payments, and cutting the capital improvement program for roads and public transportation.