The Republic of Ireland’s financial crisis was triggered by the bursting of a property bubble, leaving the banking sector with huge defaults which risked destroying the sector. Ireland became the second Eurozone nation to receive an EU/IMF bailout, worth €67 billion, in December 2010. The loan came with the usual caveats requiring structural reforms which were designed to put the Irish economy on a stable footing and, naturally, involved a raft of austerity measures. Ireland emerged from the bailout three years later.
Figures released for the latest quarter, Q2, show that the Irish economy grew by 1.5% and enjoyed growth of 7.7% compared to the position in Q2 2013. The news was sufficiently positive that the government improved its growth forecast for the full year and announced that no new austerity measures would be needed for the nation to be able to meet the target of ensuring that public borrowing was no more than 3% of GDP by the end of next year. Currently, the budget deficit has fallen to 3.5% of GDP which is well ahead of the scheduled reduction for 2014 of 4.8%. The news means that cuts planned to slash a further €2 billion from the budget, to meet the budget deficit target, by spending cuts and tax rises can now be scrapped.
Analysts had been expecting a much weaker Q2 performance with anticipated growth of 0.5%. On the back of the actual figure, projected growth for the full year has been revised upwards for a second time in as many weeks from 3% to an impressive 4.5%. Of course, the figures are relative and come of a weak baseline. In the year to the end of June, growth across the Eurozone as a whole came in at just 0.7%, in comparison.