Economy suffers 32% loss in competitiveness

THE loss of competitiveness in the Irish economy from the start of 2000 to the end of 2008 was a massive 32%.

For an economy crippled by banking problems and its worst recession since the mid-1950s, getting back to export-led growth will be a huge but vital task.

That is the view contained in the report by the three leading Irish stockbroker firms, which set their differences aside yesterday to produce a unified blueprint to rescue the economy.

Called The Irish Economy: Charting the Course to Irish Economic and Financial Stability, the 36-page long report does not pull its punches on what needs to be done.

Apart from sorting out the banking crisis and tackling the national finances, it says we must return to the late-1990s exporting model if we are to get the economy off its knees.

Some reports say the economy could regress 8% this year and a further 3.5% next year.

To counter the slump, we have to recover our competitive edge, the report says.

Domestic costs accounted for one third of the erosion of Ireland’s competitive base, with the surge in the euro accounting for the remainder.

That loss was masked by the construction boom and needs to be redressed urgently. The report says, given our lack of control over exchange rate policy, we have to find savings domestically.

The most efficient way of doing that is by cutting our wage bill and restoring the reputation of Ireland as a good place to do business in.

Donal O’Mahony of Davy said the National Treasury Management Agency had little difficulty raising funds internationally to fund the country’s narrowing needs for 2009. While costs have risen, they are not a disaster.

He said suggestions that the loss of our AAA rating from Standard & Poor’s would cost us e1 billion in additional interest payments were totally misleading.

Also, the view that Ireland could or would struggle to pay its debts was “bogus”, he said.