Thursday, March 01, 2007


Celtic Tigerites got the fright of their lives Tuesday when €4 billion was wiped off share values on the Irish Stock Exchange following a sudden and unexpected 9% drop in the Chinese stock market because of rumours that the Beijing Government was about to introduce a capital gains tax on foreign investments in the Chinese economy. European and US exchanges experienced the same phenomenon which spread like falling dominoes across the world stock market system wiping out all first quarter gains of 2007 for the majority of market leaders.

The shock wave will gain more significance here as Special Savings Accounts (SSIAs) due to mature 28th FEB will have their valuations based on that day’s market closing figures. Thus, equity based accounts invested only in Irish stocks would lose more than €1000 from their totals compared with, say, the December figure of €30,000 if yesterday’s 3.5% fall is repeated today, or, even worsens.

This financial tsunami from Asia exposes the fact that the so-called “Celtic Tiger” is a wobbly-legged animal at best, more Giraffe than Tiger, over-dependent on foreign investment continuing at a rate which, in the longer term, is unsustainable and with severe weaknesses in internal structures which are becoming ever more apparent in the past six months or so. Foreign investment from the US which is the largest contributor to the CT basket of foreign investment, could be curtailed in the not too distant future if the US Democrats, now back in control of the US Congress, were to proceed with moves to “repeal tax giveaways that encourage companies to move jobs overseas”. Combined with pressure from a rising Euro on international exchange rates on Irish export prices, this move would severely impact the growth possibilities for CT investment prospects. Even without this looming threat, CT employment levels have been suffering from high profile closures and re-locations of US multi-nationals to low-wage economies in China and east Asian centers in the last six months.

The internal market is heavily dependent on construction both for employment and for public revenues as the Government tax take is high in this sector compared with others. The type of construction, tending towards the luxury end of the market with massive investment in single tenant or young couples without children occupancy is wasteful and ephemeral as broader family development is not catered for and the neglect of social housing programmes for the past ten years of FF/PD neo-liberalism has increased the areas of ghettoisation in towns and cities resulting in worsening crime, drug addiction and related social problems with concomitant increased public expenditure on control mechanisms. The investment in infrastructure projects, while positive in several aspects, as the country was severely lacking in modern transport and communications, has only been sufficient to “catch-up” with the omissions of the 70’s and 80’s and has not provided adequate leeway for the increased economic activity and population growth of this century.
The continuing prejudice against investment in public transport, both in the national rail network which has only received replacement financing for scrap assets, and the lack of integrated transport systems for the largest cities and towns, inhibits local economic growth and local investment which are urgently necessary to offset any losses to the vagaries of the international financial markets which are now descending rapidly upon us.

The incompetence of the FF/PD government in deliberately preventing the link-up of the two LUAS tramlines in the centre of Dublin, only to be now forced to agree to doing it four years later at treble the cost is one example of the lack of vision and inadequacy of this clapped-out government which, hopefully, will be dismissed from office in the coming General Election in a few months time. Government failures to implement its own National Spatial Plan, tackle the country’s heavy dependence on imported energy, provide an efficient, accessible and decent health service, channel outcomes from investment in education and research into commercially viable local industries and export leaders, bode ill for the future of the so-called "Tiger " economy. .
FearFeasa Mac Léinn
Áth Cliath/Dublin, 01 Márta/March 2007.

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