Word: irelander
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...Ireland's attempts to navigate its way out of trouble will be watched closely by its neighbors. The country's economic boom, which followed years of underperformance, drew both international plaudits and curious visitors. Delegations from Chile to China dropped in to learn first hand from its turnaround. But just as Ireland offered a blueprint during the good times, so its recent stumble - and prospects for recovery - may offer lessons to others in the grip of the global downturn...
...Ireland's transformation in the 1990s was as sweeping as it was swift. Lured by low taxes and a young, well-educated workforce, multinational firms such as Intel, Dell and Hewlett-Packard set up shop, establishing Ireland as a bridge between the U.S. and Europe. Exports soared, helped by billions of dollars in E.U. development funds and the government's clever management of public finances. Growth took off too: the Irish economy expanded at an average of 6.5% a year during the '90s, more than double the rate of the previous decade...
Shortly after the turn of the century, though, the housing boom began to spin out of control. As incomes and employment in Ireland rose, cheap credit and tax incentives fueled a buying frenzy that pushed up both prices and housing stock: the cost of an average house rose almost three-fold in the decade through 2006, while some 40% of the country's housing was built in the last decade, according to Brian Devine, an economist at Dublin-based stockbrokers NCB. At the Grange, a swish 11-acre (4.5 ha) development in Dublin, realtors sold 15 luxury apartments a week...
...construction mania fast became "a growth that squeezed all the other organs of the economy," says John Fitz Gerald, an economist at Dublin's Economic and Social Research Institute (ESRI). That starved Ireland's exporters of valuable resources. The result: the country's share of euro-zone exports has slipped by a fifth since 2001, while housing investment grew to 14% of Ireland's economy by 2006, roughly three times the European average. When values and demand began to fall - house prices fell 10% in the year to August, while apartments at the Grange are now selling at a rate...
Repairing that will require the nation to kick its housing addiction. In future, says Rossa White, chief economist at Davy, a Dublin-based brokerage, "Ireland, as a small economy, will rely on trade to generate increases in living standards. We need to get back to that. We lost sight of it." That won't be easy, as long as major trading partners are themselves caught up in the slowdown; the U.S., for instance, buys roughly a fifth of Ireland's exports. It'll take some time, too, for exporters to redeploy resources such as labor freed by the housing slowdown...