In the past few months almost all of the news coming out of the eurozone has been negative, causing the euro to fall to multi-year lows. Weak economic data, combined with strong deflationary pressures have pushed European interest rates deep into negative territory, causing major headaches for its financial system. Yet even in the midst of this financial storm, some unexpected rays of economic hope are starting to emerge.
For the first time since 2007, every eurozone country – even Greece – is forecast to show positive economic growth this year. One country, however, stands above the rest – Ireland. The Emerald Isle is forecast to grow GDP over 3.2 percent – the highest of any country in the eurozone, even higher than the forecast for the U.S.
Consumer confidence readings are now higher than before the Great Recession in 2008, and the most recent Irish Purchasing Managers' Index (PMI) readings came in at 15-year highs. Recent unemployment data shows declines for three straight months bringing the unemployment rate down to 11.3 percent – the lowest level since 2008.
In 2010, Ireland got into financial trouble due to a busted property bubble and needed a central bank bailout. Other countries also got into financial trouble and needed bailouts. But Ireland emerged at a much faster pace than many other countries.
- Ireland had a competent government that put in place the necessary reforms to get their finances back in order.
- More importantly, there was a greater culture of capitalism and a strong manufacturing base due to its low corporate taxes that helped boost exports.
Our View: While every country is different, Ireland does show that with proper discipline and structural reform, a country can come back strong from the brink of collapse. Ireland is setting a great example for its European neighbors and has plenty of reason to celebrate this St. Patrick’s Day.
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