Post-2008 Irish economic downturn
The post-2008 Irish economic downturn in the Republic of Ireland, coincided with a series of banking scandals, followed the 1990s and 2000s Celtic Tiger period of rapid real economic growth fuelled by foreign direct investment, a subsequent property bubble which rendered the real economy uncompetitive, and an expansion in bank lending in the early 2000s. An initial slowdown in economic growth during the 2008 financial crisis greatly intensified in late 2008 and the country fell into recession for the first time since the 1980s. Emigration, as well as unemployment, escalated to levels not seen since that decade.
The Irish Stock Exchange general index, which reached a peak of 10,000 points briefly in April 2007, fell to 1,987 points—a 14-year low—on 24 February 2009. In September 2008, the Irish government—a Fianna Fáil–Green coalition—officially acknowledged the country's descent into recession; a massive jump in unemployment occurred in the following months. Ireland was the first state in the eurozone to enter recession, as declared by the Central Statistics Office. By January 2009, the number of people living on unemployment benefits had risen to 326,000—the highest monthly level since records began in 1967—and the unemployment rate rose from 6.5% in July 2008 to 14.8% in July 2012. The slumping economy drew 100,000 demonstrators onto the streets of Dublin on 21 February 2009, amid further talk of protests and industrial action.
With the banks "guaranteed", and the National Asset Management Agency established on the evening of 21 November 2010, then Taoiseach Brian Cowen confirmed on live television that the EU/ECB/IMF troika would be involving itself in Ireland's financial affairs. Support for the Fianna Fáil party, dominant for much of the previous century, then crumbled; in an unprecedented event in the nation's history, it fell to third place in an opinion poll conducted by The Irish Times—placing behind Fine Gael and the Labour Party, the latter rising above Fianna Fáil for the first time. On 22 November, the Greens called for an election the following year. The 2011 general election replaced the ruling coalition with another between Fine Gael and Labour. This coalition continued with the same austerity policies of the previous coalition, as the country's larger parties all favour a similar agenda, but subsequently lost power in the 2016 General Election.
Official statistics showed a drop in most crimes coinciding with the economic downturn. Burglaries, however, rose by approximately 10% and recorded prostitution offences more than doubled from 2009 to 2010. In late 2014 the unemployment rate was 11.0% on the seasonally adjusted measure, still over double the lows of the mid-2000s but down from a peak of 15.1% in early 2012. By May 2016, this figure had fallen to 7.8%, and had returned to a pre-downturn level of 4.5% by June 2019.
Background and causes
The economy of the Republic of Ireland expanded rapidly during the Celtic Tiger years due to a low corporate tax rate, low ECB interest rates, and other systemic factors. At the end of the third quarter of 2010, German banks had between US$186.4 billion and $208.3 billion in total exposure to Ireland with $57.8 billion in exposure to Irish banks. This led to an expansion of credit and a property bubble which petered out in 2007. Irish banks, already over-exposed to the Irish property market, came under severe pressure in September 2008 due to the 2008 financial crisis.The foreign borrowings of Irish banks rose from €15 billion to €110 billion in 2004–08. Much of this was borrowed on a three-month rollover basis to fund building projects that would not be sold for several years. When the properties could not be sold due to oversupply, the result was a classic asset–liability mismatch. At the time of the bank guarantee the banks were said to be illiquid by €4 billion; this turned out to be an enormous underestimate.
Impact
The economy and government finances began to show signs of impending recession by the end of 2007 when tax revenues fell short of the 2007 annual budget forecast by €2.3 billion, with stamp duties and income tax both falling short by €0.8 billion resulting in the 2007 general government budget surplus of €2.3 billion being wiped out. An imminent recession became clear by mid-2008. Subsequently, government deficits increased, many businesses closed and unemployment increased. The Irish Stock Exchange fell and many immigrant workers left.Anglo Irish Bank
was exposed to the Irish property bubble. A hidden loans controversy in December 2008 led to a further drop in its share price. The ISEQ dropped to a 14-year low on 24 September 2009, probably triggered by the unexpected resignation of former Anglo Irish Bank director Anne Heraty from the board of the Irish Stock Exchange the night before.Property market
Due to the ending of the bubble, the residential and commercial property markets went into a severe slump with both sales and property values collapsing.Developers such as Liam Carroll began to fall behind on their loan repayments. Due to the 2008 financial crisis, banks such as ACC pushed for their revenue recovery and requested liquidation of the development firms.
Economy
The Irish economy entered severe recession in 2008, and then entered into an economic depression in 2009. The Economic and Social Research Institute predicted an economic contraction of 14% by 2010. In the first quarter in 2009, GDP was down 8.5% from the same quarter the previous year, and GNP down 12%. Unemployment rose from 8.75% to 11.4%. The economy exited recession in the third quarter of 2009, with GDP growing by 0.3% in the quarter, but GNP continued to contract, by 1.4%. The economy grew by 1.9% in Q1 and by 1.6% in Q2 of 2011 but contracted by 1.9% in Q3.Unemployment
The unemployment rate rose from 4.2% in 2007 to reach 14.6% in February 2012.Emigration
The Central Statistics Office estimated that 34,500 people left the country from April 2009 to 2010, the largest net emigration since 1989. However, only 27,700 of these are Irish nationals, an increase of 12,400 since 2006. It's also notable that more people went somewhere other than the UK, EU or US, traditional destinations for Irish emigrants.Downturn
2008: Cowen government
Following the May 2008 appointment of Brian Cowen as Taoiseach, the ruling Fianna Fáil party had been polling close to their 41% levels of the 2007 election but the party began to fall in the polls from September 2008. Their support fell to third place for the first time ever behind both leading opposition parties in a national opinion poll published in The Irish Times on 13 February 2009, polling only 22%. A 27 February poll, indicated that only 10% of voters were satisfied with the Government's performance, that over 50% would like an immediate general election. They gained about 24% of the vote in the June 2009 local elections and continued to languish as the crisis intensified during the remainder of the year, reaching a new low of 17% support in September 2009. During the 2009/2010 period opposition calls for an early election intensified and some of their own TDs resigned from the party supporting the calls and reducing the Government majority to single digits. The Government was urged by the courts to hold a long-delayed Donegal South by-election. By December 2010, following the IMF intervention, their support reached a further record low of 13% and their coalition partners, the Green Party, announced that they would withdraw support from Government in January 2011 once the 2011 budget had been passed. The Government announced that an election would take place in Spring 2011 but the intended date had to be brought forward to 25 February 2011 following a widely criticised cabinet reshuffle. Taoiseach Cowen was replaced as party leader by Micheál Martin. At the election, Fianna Fáil received 17% of the vote and their seats collapsed from 71 outgoing to a record low of 20. The Fine Gael and Labour opposition secured record seat gains but no overall majority and formed a coalition government.Government emergency budget of October 2008
Ireland officially declared it was in a recession in September 2008. Before this declaration, the Irish government announced, on 3 September 2008, that it would bring forward the 2009 government budget from its usual December date to 14 October 2008. In a statement, the government claimed that this was largely due to a decrease in the global economy. The budget, labelled "the toughest in many years", included a number of controversial measures such as a proposed income levy which was eventually restructured, and the withdrawal of previously promised HPV vaccines for schoolgirls. Other results of the budget included a new income levy being imposed on all workers above a specified threshold and the closure of a number of military barracks near the border with Northern Ireland.An unexpected public outcry was invoked over the proposed withdrawal of medical cards and the threatened return of university fees. A series of demonstrations ensued amongst teachers and farmers, whilst on 22 October 2008, at least 25,000 pensioners and students descended in solidarity on the Irish parliament at Leinster House, Kildare Street, Dublin. Some of the pensioners were even seen to cheer on the students as the protests passed each other on the streets of Dublin. Changes to education led to a ministerial meeting with three Church of Ireland bishops who were assured by O'Keeffe that religious instruction would be unaffected by the budget changes.
Rebellion within the ranks of the ruling coalition government led to a number of defections of disenchanted coalition members. County Wicklow TD, Joe Behan resigned from the Fianna Fáil party in protests at the proposed medical card changes after suggesting that past taoisigh Éamon de Valera and Seán Lemass "would be turning in their graves at the decisions made in the past week". Independent TD Finian McGrath then threatened to withdraw his support for the government unless the plan to remove the overs 70s automatic right to a medical card was withdrawn completely. Taoiseach Brian Cowen postponed a planned trip to China, sending Minister for Education and Science Batt O'Keeffe ahead to lead the delegation. Behan, alongside McGrath and former government minister Jim McDaid, later voted against his former colleagues in two crucial Dáil votes on medical cards and cancer vaccines. These defections reduced the Irish government's majority of twelve by one quarter.
A supplementary budget was delivered in April 2009 to address a fiscal shortfall of over €4.5 billion.