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Main Content
Case Studies in Crises: Ireland, Spain and Greece
Ireland, Spain and Greece are three of the five countries (the others two being Portugal and Italy) which comprise the delightfully insulting acronym “PIIGS”.
First heard around the corridors in Brussels, the name gives an apt description of how some states view, as they see it, these countries financial ineptitude.
All three have been, and continue to be, severely affected by the financial crisis. In many ways, they have in fact been worse affected than many other European States. How are they dealing with their respective crises and were there common factors in the situations they found themselves in?
Ireland entered its recession in a very different situation to that of Spain or Greece. The 90s witnessed an unprecedented economic boom in Ireland, christened the, “Celtic Tiger”. It was mainly facilitated by a drive to attract large multinationals to set up in Ireland with a low corporation tax and a well-educated workforce. This boom resulted in a low unemployment rate. Ireland became a country of immigration for the first time in living memory. Inflation was rampant and a property bubble was inflated to the inevitable point of explosion.
Similarly, Spain’s property and construction industry created a bubble which was bound to burst once the world economic downturn struck.
Once these global factors struck Greece, its economy was exposed. The problems caused by the global recession were compounded by revelations that national statistics had been altered in order to cover the fact that Greece, in terms of debt levels, exceeded limits set down by the EU.
For this reason, the economic crisis was more pronounced in Greece than either Spain or Ireland; culminating in EU and IMF intervention of €110b to bail out the country.
The key difference between the bank bailouts in Ireland and Spain compared to that of Greece is that the former two were in a position to undertake the bailout themselves and, up to now at least, have not required IMF intervention.
The governments of Spain and Ireland have been in a position to take over national banks, guarantee savings and make efforts to stabilise the banking sector. These efforts, on the whole, have met with approval from the EU and the IMF who are monitoring events closely to ensure the Greek situation is not replicated. This is a particular concern for Spain whose economy is far larger than Greece’s and is one of the biggest in the EU.
The nature of the economic crisis in these three countries has provoked differing reactions from sections of society. The governments of each of the countries have taken similar actions in relation to public sector pay. Wages have been reduced or frozen, and pensions diminished.
Curiously, in Ireland there has yet to be protest marches and demonstrations of the nature of those seen in Madrid or Athens. And this is despite the scandals, particularly in the property and banking sectors which have revealed a culture of recklessness and mismanagement. In Spain, protests have been widespread while Athens, due to the very severe nature of the Greek economic crisis, has seen sustained, often violent protest which has even lead to fatalities.
On a wider scale, this is a European issue and not just something to be resolved by their countries in isolation. All three are Eurozone members and for that reason their economies must be saved in order to keep the single currency afloat. For that reason that the EU and IMF are monitoring and advising policies and courses of action in Spain and Ireland while in Greece these bodies and member states have are negotiating the funding of the Greek bailout in close consultation with Athens.
While Spain and Ireland share similarities in their experience of their own economic crises, Greece’s fundamentally more severe experience serves as an economic warning to all EU countries. By necessity, if not design, all the countries now have to stick together.