In August 1994, I touched down in Israel's Ben Gurion International Airport. Following the traditional Mossad grilling I emerged out to a scene more reminiscent of Moscow than the Middle East. There were Russians everywhere, pushing trolleys, manning bank telling machines, checking bags and serving drinks. Signs in Russian were almost as commonplace as the native Hebrew.

Tel Aviv was booming. "All these Russians, they've certainly shaken us up", exclaimed my taxi-driver. "They'll work like Trojans to send their kids to school, not like this shower" pointing to a family of Orthodox Jews.

"The Russians," he continued, "arrived here with nothing, no money, no places to stay, no relatives and what's more they couldn't speak the language and now they're doing the business."

His sentiments were echoed practically everywhere. Most company directors eulogised the talent and drive of these new immigrants and how they had invigorated the place. The Russians, they said, couldn't have come at a better time, just as the economy was getting too big for its boots. Meanwhile, over at the Ministry of Finance, the typically dour economists who drew up the blueprint for absorption could not believe how easily the assimilation had gone.

Israel, a country of just over 4 million people with a land mass which could fit comfortably into two of our provinces, absorbed more than 700,000, mainly Russian and Ukrainian, immigrants between 1989 and 1992. A further 100,000 per year followed until 1996.

Earlier in the 1980s, the economy was characterised by overspending and general government delinquency. By 1989, following huge cuts in government spending, the economy, and particularly its essential high-tech sector, had begun to recover. However, with the upswing came labour bottlenecks and as skilled labour became scarce, wages began to rise. At about the same time, the crumbling Soviet Union began letting its sizeable Jewish population emigrate in significant numbers for the first time.

Israel braced itself for a huge influx . It was widely forecast that public spending would explode, unemployment would sky-rocket and the resulting budget deficit and borrowing binge would lead an inevitable devaluation of the shekel followed by inflation.

In the event, the opposite occurred. The immigrants provided the dynamo which propelled the economy forward in the 1990s. Not only did GDP rise, but GDP per head rose also. Despite the huge increase in the labour force, unemployment actually fell. Nor did the much-feared rise in public spending materialise. Since 1990, Israel's population has risen by over 30 per cent, but the economy has expanded by 51 per cent.

The complexion of the economy also changed. Instead of competing for the attentions of American multinationals, which had been the case in the past, the government chose to harness the new talent in what are termed "technology greenhouses". Instead of subsidising inward investment, domestic start-up firms were fostered by fusing the immigrants' talents with the cash of Israeli entrepreneurs. The success of this approach is borne out by the fact that there are now more Israeli high-tech companies listed on the US Nasdaq (high-tech) Stock Index than from any other foreign country.

This experience of immigrants providing a huge boost to the economy is not unique. Why on earth does anyone think the US has become the world's richest country if not from wave after wave of hungry immigrants, from Palermo to Portlaoise, Odessa to Offaly?

All historical and contemporary evidence supports the economic case for increased immigration. Immigrants arrive with new skills and different attitudes, adding to the capacity of the labour force and injecting dynamism into the economy.

In economic terms, labour should be regarded as a resource much like oil. If a country has lots of oil, then the potential to expand is greater. But if it runs down its reserves of oil, the country can maintain its future potential only by finding more black gold.

The same goes for the labour force. If a country has a huge pool of labour, its potential to grow is significant. If it runs down these reserves through falling unemployment, the economy has to find more people to maintain its growth potential. It may sound odd, but if unemployment keeps falling rapidly, the economy will eventually run out of people. For Ireland in 1999, the Israeli story should be very pertinent. We are experiencing significant labour shortages across the board which, in the short term, can be alleviated only by increased immigration. More challengingly, if we want to sustain our record growth rates, a permanent boost to our labour force is imperative.

Traditionally, emigration sucked the lifeblood out of our economy. Thirty years ago, when we emerged from the economic dark ages, we had loads of people and no capital. We needed to import capital. As we had no borrowing record as a State, this imported capital had to come from direct foreign investment. The IDA skillfully used our tax system to this end. The rest is history.

Now, as we move into the new millennium, we have precisely the opposite problem, loads of capital and not enough people. EMU ensures that we can borrow as much as we like at extremely low interest rates. We will never again be strapped for credit.

So what do we do? All evidence suggests we import people in the same way as we imported capital in the past. But from where?

One region is the former communist bloc. Anyone familiar with Eastern Europe will have experienced the odd sensation of getting a taxi driven by a nuclear physicist or being served by a barman who is a qualified pharmacist. The streets of Moscow, Kiev and Sofia are full of technicians, scientists and potential high-tech wizards who haven't a bean.

This is a monumental waste of brain power. Moreover, due to the presence of the mafia and a political system which is better described as kleptocracy rather than democracy, there is little real prospect of huge Western direct investment. In a word, these highly qualified people are the walking dead. They will never reach their full potential if they stay where they are.

Imagine a country with a hard currency, good infrastructure and sophisticated property rights which opened its doors to this Eastern European talent. Such a country would be transformed overnight into a global investment magnet. Indeed, the subsequent boom would be sustainable in the medium term.

Ireland is in this lucky position. We now need immigrants and never has the world been so full of skilled workers looking for a new home. Without the traditional capital constraint, which, thankfully, EMU eliminates, there is no reason why these immigrants could not be employed productively almost immediately.

Crucially, because we have given up our exchange rate, the main factor determining our competitiveness is the quality, size and flexibility of our labour force. Finally, in very practical terms, certain frothy sectors of the economy, such as the housing market, need a lasting increase in demand for accommodation. Put simply, Europe's least populated State cannot sustain Europe's fastest-growing land prices for long without a significant increase in population.

EMU gives us both the reason and the means to absorb new immigrants. In the opening years of the new millennium we should seize this opportunity with both hands.

David McWilliams, a former Central Bank economist, manages an independent economic consultancy in London. He was in conversation with an Irish Times reporter.