Ireland's remarkable journey from rags to riches is an inspirational story for Europe's poorest economies and has helped Irish society to grow up, according to a new report. writes Siobhán Creaton, Finance Correspondent.
The report was published yesterday by the Economist magazine, which in 1988 branded Ireland the "poorest of the rich" economies. At that time it illustrated its research with a photograph of a young street beggar trying to catch coins from passers-by and concluded that the Irish economy was heading for catastrophe.
Sixteen years on, a new report, The luck of the Irish, says no other country in the rich world has seen its image change so fast, and puts Ireland's much-envied economic miracle down to its "catching up" with its neighbours.
Presenting the report in Dublin yesterday, its author, Mr John Peet, said that based on his research it was now difficult to understand why it had taken Ireland so long to put things right.
The survey points out that at independence in 1922, Ireland was as rich as most European states and only a bit poorer than Britain. "The Irish miracle was in reality about catching up with better-off neighbours who had played their economic cards much more successfully since then."
The eight central European countries that joined the EU in May are fascinated by Ireland, according to the report. "Civil servants and businessmen in Dublin talk wearily of a procession of visitors from such places as Vilnius and Bratislava, anxious to emulate Ireland's leap from one of the EU's poorest members in the 1980s to one of its richest."
Ireland's enormous success in winning billions of EU structural funds is of particular interest to them, and is viewed as a significant factor in fuelling much of the Celtic Tiger's growth over the past decade.
These new EU members all promise that they will make good use of EU money, as Ireland did, but Mr Peet contends that while this cash injection played a significant role in revitalising the Irish economy, it was by no means the single factor driving Ireland's miraculous transformation.
The adoption of sensible budgetary and economic policies, tax cuts and partnership played their part. Ireland's success in luring foreign multinationals by offering low tax rates and low costs has been crucial, while Ireland's investment in secondary and higher-level education in the 1960s ensured the ready supply of skilled workers.
The Economist concludes that the biggest contribution to the Irish miracle came from more people working, mainly due to the surge in the number of women participating in the workforce. Now the economy needs to find ways to keep the momentum going, it says.
Mr Peet concurs with much of the recent economic forecasts that suggest the Celtic Tiger will continue to roar loudly for the next couple of years, expanding at a pace of between 4 and 5 per cent, but remains concerned about the housing market.
In May 2003 the Economist caused a stir when it said that Irish house prices would fall by up to 20 per cent over the next four years as part of a worldwide decline in property values, the most pessimistic report to be issued on the sector.
Its research was challenged by a range of commentators some of whom claimed the magazine had failed to take account of local factors.
Mr Peet again repeated those concerns, saying Ireland is "particularly vulnerable" to a house price crash, mainly because as part of the eurozone it cannot raise interest rates to prick the bubble.
The survey also focuses on what it terms the "scandal" of tax breaks in the stud industry. It says the biggest scandal of the equine industry in Ireland is that super-rich stud-farm owners "shamelessly" benefit from not paying income or corporate taxes.
"The green countryside of Ireland is now pleasantly pockmarked not just with racetracks but also with smart-looking stud farms," it states. The report notes the great social changes in Ireland and mentions the decline of the strength of the Catholic Church.
"Changes in areas such as the divorce laws, along with a society which tolerated the Taoiseach living with a woman who was not his wife, as Mr Ahern did for many years, demonstrates the decline of its power, according the survey.
It notes that while the Tánaiste, Ms Harney, has described the Irish economy as being closer to Boston than Berlin, it believes it is closer to the UK economy.
"The really big thing is that 30 years after joining Europe, Ireland has grown up. No longer does it suffer from a lack of confidence or excessive touchiness about Britain. Instead it has become like any other well-off European country, with reasonable if not outstanding growth prospects and a recognisably European social mix."
The Economist says this is a vast change for the better.