The Irish economy is likely to continue to achieve growth rates above the EU average "for the foreseeable future", according to the chairman of Commerzbank and president of the German banking association. Dr Martin Kohlhaussen said yesterday the Republic's economy had been "the European success story of the decade", achieving an average 6.25 per cent annual GDP growth, when the German equivalent was just 1.3 per cent, he said.
Dr Kohlhaussen, who was in Dublin to mark the 10th anniversary of Commerzbank in Ireland, did not believe the economy was likely to have a "hard landing".
"I understand there has been some negative sentiment coming out of circles in London that the Irish economy may be heading for a hard landing. For example, there are signs the social partnership on which the success of the Irish economy has been built, is coming under strain.
"Our own view is that Ireland is not headed for a sharp downturn. While historic rates of growth may be unsustainable, the Irish economy remains strong and growth here is likely to continue to outperform the EU average for the foreseeable future."
Given the success of the Irish economy and the IFSC over the past decade, it was not surprising that other countries had been somewhat jealous of the achievement, not least Germany, Dr Kohlhaussen said.
"I know that within the EU a committee is working on drawing up a list of harmful taxation measures for the EU. Your Minister for Finance is well aware of these developments and I admire his strategy of moving Ireland towards a general 12.5 per cent corporation tax rate by the beginning of 2004," he added.
Mr McCreevy should use every opportunity when he met his EU counterparts, particularly the German Finance Minister, Mr Hans Eichel, to emphasise the job-creating substance of the EU incentives granted to Ireland back in 1987, said Mr Kohlhaussen. "The fact that you have used these incentives very well to lift your eco nomy from its much lower level in the 1980s, should not now open you to criticism from others."
This economic success was due to membership of the EU, the structural funds the State received and the introduction of the single market, he said. Ireland also benefited hugely from foreign direct investment, being the fifth largest recipient of US direct investment in 1997, according to the OECD.
Low taxation was a key factor in encouraging foreign firms to set up here, he said, "but it is significant that US foreign investment led the way. One can thus argue that your country has also benefited from the strength of the US economic boom during the past 10 years."
Other important factors, in his view, were the partnership agreements with the trade union movement and the Government's action on reducing public deficits and debt. "We're hoping we can take back this formula and get the German government and trade unions to agree to it."
His bank's involvement in Ireland reflected the positive economic growth made during the past decade. In 1989 Commerz International Capital Management set up a subsidiary, CICM (Ireland), as a joint venture with AIB. It was the first German operation to be licensed and to move into the IFSC.
Another company, CICM Fund Management, manages 7.5 billion deutschmarks (€3.8 billion) in assets through seven public companies and a unit trust fund. Commerzbank Europe (Ireland), established in 1994, through subsidiaries in Ireland and the US, has commercial paper programmes amounting to $4 billion (€3.8 billion) to assist in funding its operations.
Commerzbank employs more than 100 people in Dublin and has taken a 25-year lease on a new 44,000 sq ft premises in the IFSC, to which it moves in May.
