Gillian Edgeworth, 20 Nov 2017
Gillian Edgeworth of Wellington Management starts out with the story of how Ireland’s economy was able to converge with the rest of the EU in the period from the 1980s to the present. From 1990-2006 Ireland’s economy converged four times faster than did comparable emerging markets. It did this by taking advantage of the large increase in global trade which was seen during this period. With a corporate tax rate of only 12%, in this period Ireland became the base for many international corporations. Though this reliance on foreign cash flows allowed Ireland’s economy to grow, it also contributed greatly to Ireland’s vulnerability to the forces of the 2008 economic crisis.
The fact that Ireland had so much international economic involvement also meant that when it came time to handle its debt crisis, the Irish government had little say as the majority of the debt was owed to foreign creditors. Because Ireland is so heavily dependent on foreign cash flows experts worry that although it is currently successful it is particularly exposed to destabilizing changes in the international market.
