Ireland Eyes Bailout Exit

Thank goodness Ireland didn’t cave into German and French pressure to raise their corporate tax rate.  We were emphatic back then they not give in to the Eurocrats (see here).

Last week’s Economist gave a nice overview of the “fitter yet fragile” Irish economy,

Helped by a low corporate-tax rate of 12.5%, Ireland continues to attract foreign direct investment (FDI), especially from American firms and particularly in pharmaceuticals, information technology and financial services. The number of new FDI projects in 2012 has been similar to that in 2011, itself the highest for a decade, says Barry O’Leary, the boss of Ireland’s inward-investment agency.

The foreign presence is now a towering one, so much so that Irish exports actually exceed the value of GDP. The contribution from net trade—exports less imports—has more than offset falls in domestic demand, which remains traumatised by excessive debt (households owe 209% of disposable income), continuing austerity and a financial squeeze as the now well-capitalised but unprofitable Irish banks limp along.

Jan10_Ireland

The large presence of foreign firms has sparked debate about increased vulnerability to the global economy and how economic activity should be measured.   GDP or GNP?

Click here to read the full Economist article.

(click here if video is not observable)

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