According to NCB, the export sector is the main driving force of the economy as the export increased by 6.7% in 2010, in which the Irish exporters association based the growth of exports to the United States by 18%, Germany by 42% and to Canada by 27%. In addition, competitiveness was evident in 2010, as the costs of energy, construction, rent, and labor competed; this has led to the decrease in office rents to 40%. However, the domestic sector of the economy remains stagnant, thus leaving the exporting sector as the main driver to the recovery of the economy.
The tourism sector will be affected by the change in austerity measures, in that tourist charges increase. Hence tourists are required to pay more as compared to the previous years. This factor could contribute to the economic recovery if tourists are still willing to explore Ireland attraction sites, hence contributing to foreign currency growth. However, the negative side of this increase in charges would lead to the reduction in the number of tourists visiting Ireland, thus worsening the situation. Nevertheless, the private sector can contribute heavily to the economic recovery and provide jobs for the unemployed. However, the domestic investments in Ireland are poor at the moment since investors fear investing in countries that have uncertainties regarding their future.
Creative industries may contribute to economic recovery, as they are the main providers of wealth and jobs through their creative skills. Fortunately, the culture, arts, and leisure minister, Nelson, signed 4 million euros to this sector in aid to developing skills and capacity, as he encouraged this sector to continue promoting new ideas, which may lead to economic recovery. Therefore, the creative industry sector may contribute to the growth of the economy through the creation of jobs for the unemployed and the creation of quality ideas that lead to the generation of wealth.
The banking sector can be restructured so as to create a way for Ireland to stop relying on IMF come 2014. This sector is the main determinant for Ireland to bail itself out of the EU-IMF aid. The reduction of banks is the first step that the Irish government has made in regard to this sector. According to Gorman of BBC News, the GDP of the Ireland Republic has reduced by 10%, and the Northern Ireland economy is expected to rise by 2.2 this year, hence a new hope for the economy as years progress.
There is greater awareness of the need to renegotiate the country’s debt with its main creditors. How will this process take place, and what would be the consequences not only for Ireland but also for other nations? According to NCB, “the lowering of the interest rate on aid and/or decisions on the deleveraging of the Irish banking sector could have a positive impact on the outlook for Ireland’s debt to GDP and debt sustainability.”
Rose identifies three main reasons why countries should pay their debt. First, if a country relaxes on paying off its debts, its assets may be seized by its creditors. Secondly, in refusal to pay a debt, a country may not benefit from capital flows in the future, and its creditors may reduce a country’s benefit of international trade. Therefore, the New York Times is insisting on the European countries to allow the Republic of Ireland to renegotiate on its debt, regarding the deal as too tough for the country. Indeed, Ireland’s debts are too high, and so are the interest rates charged, thus leading to stagnation in terms of growth.
The renegotiation process normally takes place between the creditor and the debtor, and it is based on fairness and transparency. It involves a decision-making process, which incorporates both the debtor and the creditor. All stakeholders are given an opportunity to air their views before a final decision is reached. The debtor’s needs are put into consideration, especially its sectors, before the debts are collected. Nevertheless, the new prime minister of Ireland seeks to renegotiate the deal with IMF in order to reduce the 5.8% interest supposed to be paid on the aid. Otherwise, Ireland will just be drained by these immersed debts, hence being incapable of catering to their financing requirements. Below is a table illustrating Ireland’s financing requirements.
Just as with the case of Greece, which made an indication of abandoning the euro, the more it stays in the euro, the higher its debt burden will be. Therefore, it would be best for Greece to exit, hence making the country competitive and leading to the creation of opportunities for exports, jobs, and tax revenue increase. With the introduction of the drachma currency, the tourist sector will benefit through foreign currency, thus enabling the country to import goods. According to Waterfield of telegraph news, the IMF bailout, which was aimed at stabilizing the economy, is turning to be intolerable to the Irish due to its estimated consumption of 85% of the country’s revenue come 2012.
According to the news, David McWilliams, an economist, suggests that the Irish can hold a referendum on the bank debts, hence presenting the European Union with a No vote from the citizens. The euro, however, is seen as insolvent, and Ireland can as well follow in the footsteps of Greece by opting for another currency. Nevertheless, leaving the euro would seem disadvantageous as most of Ireland’s creditors hail from European countries. Moreover, Keenan notes, “any resulting boost to exports and growth would help reduce the deficit and service the large foreign currency debt it would acquire from the cheaper currency.” As a result, it may devalue its new currency.