Page last updated at 23:02 GMT, Monday, 8 June 2009 00:02 UK

Irish Republic: Boom to bust

By Olivia O'Leary
BBC Radio 4

Dublin's Hapenny Bridge, which cross the river Liffey
The economic bubble has burst and the Irish are now facing the music.

"Who's that guy who always looks bored and never has anything to say?" a newcomer is said to have asked at an EU Council of Finance Ministers a few years ago.

"It's the Irish Finance Minister," a colleague replied. "He has record growth rates, overflowing state coffers and income levels 40% above the EU average. What does he need to say?"

The story is different now.

The Irish Republic's Celtic Tiger economy, with full employment and growth rates at one stage reaching 10%, has collapsed.

It is forecast to contract by more than 9% this year alone and unemployment next year is forecast to reach 17%.

London calling

For James Mooney, 23, and his generation, the crash is particularly galling.

I never thought I'd have to leave
James Mooney

While Mr Mooney was studying to be a surveyor, his lecturer told them they would all be millionaires by the time they were 35, such was the construction and property boom at the time.

Instead he is one of the new breed of Irish emigrants, living in a house in London with five other Irish people in their twenties, in a position none of them ever dreamed they would face.

"Getting dropped back to Dublin airport, that's when it hits home, that you're leaving again," says Mr Mooney.

"Sunday nights, flying back to London. I dread it.

"You see the same faces at the airport now. I never thought I'd have to leave."

Great expectations

Unlike previous generations bred for emigration - and hardened to it - James and his friends were brought up to believe that those days were long over; that they would always find work at home.

As a small open economy, Ireland could not escape the global recession. But it did not have to be this bad.

Ireland's troubles are doubled by the fact that, having started with proper export-led growth, it switched after 2001 into a consumer boom.

We were spending as if there was no tomorrow, particularly on property. We thought we had found the answer to everlasting economic growth and that answer was to build lots and lots of houses - and sell them to one another.

Everybody was fuelling the boom.

The government gave tax breaks for building, renting and buying houses.

The Irish banks lent wildly and massively to developers for overpriced sites and property, and pushed 100% mortgages at anybody they could persuade to take them.

House prices in Dublin were dearer than Paris, the cultural capital of Europe, and Dublin workers were being pushed further and further out of the capital.

They were moving to places like Cavan, Kinnegad, and Tullow - places with no rail line often a two- or three-hour round-trip commute from the capital.

Irish farmers could not believe their luck as new houses sprang up in green fields in the middle of nowhere. They had never had a crop like this and the demand was massive.

People bought fistfuls of houses - for their children or as investments. Polish workers came in to help build the houses and then rented and lived in them.

Against the profits or expected profits on Irish property, developers began to buy property abroad.

The Irish were buying up the world and the sweetest deal of all was when an Irish consortium bought the Savoy group in 2004.

The Irish, who had provided the navvies for Britain's roads, had now taken over some of its greatest establishments: Claridges, the Connaught, the Savoy Hotel itself.

Just to drive the point him, the Irish tricolour was run up the hotels' flagpoles.

No fatalism

The collapse, when it came, was quick and brutal.

The Irish banking system - to use a great Irish phrase - is effectively banjaxed.

Having overlent wildly for overinflated property deals, they have had to be rescued by the taxpayer. One bank has already been fully nationalised and others may follow. We will be paying for this bail-out for a very long time.

All over the country there are ghost villages, schemes of new houses, half occupied or half finished.

People who bought a year or two ago are stuck out in the middle of the country with big mortgages for houses that have fallen 40% in value from their peak, and are still falling.

And now those same people are facing high unemployment.

Mr Mooney wants to come home, eventually.

What kind of Ireland will he find?

The years ahead are going to be bad. We do not even know yet how bad or whether we will have to ask for outside help or what price we will have to pay for that help.

But prosperity has done one thing for us. It has taken away our fatalism, our belief that we would always be poor.

We now know there is no God up there wanting the Irish to stay poor. Just wanting us, maybe, to be a little bit less greedy.

You can hear Ireland: Boom To Bust on BBC Radio 4 on Wednesday 10 June at 1100 BST and for seven days after that on the BBC iPlayer.

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