Yesterday, Het Financieel Dagblad published an interview with Michael O’Leary and me on the future of the Irish economy. I said much else besides, and some colorful language was cut out. For those who cannot read Dutch, here’s what Google Translate made of it:
Ireland has not really learned from the crisis
Reforms in Ireland have not been substantial enough to lift the economy on a higher level and to make more resilient to shocks. Through weak political leadership and an indulgent attitude of the troika of IMF, ECB and European Commission, opportunities have been missed, leaving the country in the long term to continue to perform below par. A repeat of the scenario of a severe economic downturn that Dublin cannot get to the top of on its own, cannot be excluded.
This say two connoisseurs of Irish society, Michael O’Leary, CEO of Ryanair, and Richard Tol, originally a Dutch professor who because of the crisis moved from Dublin to Brighton.
“A crisis is an opportunity for reform, but in Ireland there is only cuts,” says Tol. “Even this very big crisis was no need for structural reforms, where there should have been.” O’Leary agrees with him.
“We had the opportunity to exploit the crisis to reform the labor market and to remove job-growth barriers. “Never waste a good crisis.” But we have missed every opportunity. In Ireland there is not much appetite for real, structural reforms. ”
Because nothing has changed, Ireland remains a “very inefficient, third-rate economy with a high cost structure,” thinks the CEO of the price fighter in aviation. Professor Tol takes into account an economic acceleration by the rebound effect, but then foresees a new crisis. “If confidence returns, for example in 2015, another period of rapid growth follows.
We might get another ten years growth rates of 5%. But because the structural problems are not addressed, this can produce a similar crisis in 2025 or 2030. Which can be much worse than the current one if the Irish by that time have not sufficiently reduced their debts. ”
Dublin has a long way to go, even if the country is by year-end released from the troika, as is widely expected. Some key figures illustrate this. The government expenditure fell, but are still well above the level of 2005. The debt has grown so much that the IMF warns that it can be unsustainable if there is no a real economic recovery soon. A major problem is the steady increase in the number of homeowners who can no longer bear their mortgage.
O’Leary does not understanding that Ireland has not faced up to reality the beginning of the crisis. “The government gets €35 billion in taxes, but spend €45 billion.
This is the first thing that should be reformed. Why are we still wasting perhaps €2 billion by giving everyone in this country child support. I’m a multi-millionaire, but my wife gets four checks each month to support our four children This is insane. ‘
The entrepreneur, who elevated efficiency in his business to a religion, is annoyed by the combination of high wages and strict labor laws that take the dynamic out of the economy, according to him.
“Why should an Irish doctor earn two or three times as much money as a German doctor? That would not be bad if productivity is proportionally higher. But you cannot be treated between 5 pm and 7 am.”
Tol regrets that important sectors of the economy such as legal services, energy and transport in practice are as closed as before the crisis. Furthermore, the 42-year-old professor knows from personal experience how high wages in Ireland are still.
“My net wages dropped by 30% between 2010 to 2012. When I started working in Brighton my salary was matched. I am now the highest paid professor in Brighton.”
That Dublin fails to get itself together, even if a crisis manifests itself as the ‘excuse, O’Leary as well as Tol explain by a chronic lack of expertise and leadership in Irish politics. The electoral system promotes that the government and parliament consist of populists.
Who please their electorate, shrink from painful measures and generally lack the knowledge and experience necessary to steer the country by a crisis. Tol: “The Dáil is full of people who can talk very well. Many have been lawyers or teachers. Expert backbenchers are not there.
No strong opposition
The professor points out that there is no separation of powers. Ministers retain their seats in the Dáil, and are the spokesmen of their own party. Moreover, there is no strong opposition, because the two major parties, Fianna Fáil and Fine Gael, are like two drops of water. What separates them historically is not idealogy, but their position during the Irish Civil War.
The troika also do not mind anymore. “The problem of the Troika,” O’Leary says, “that when the worst of the crisis had passed and the idea was established that the country was saved, focus on reforms disappeared.” According Tol especially the IMF was full good intentions, but the ECB has taken over the control. “They just want their money returned.”