AMBASSADOR’S POSTCARD Today: From Ambassador Vidmantas Purlys in Ireland

 100 000 Lithuanians live
and work in Ireland

Text: Vidmantas Purlys, Lithuanian ambassador to Ireland

The Easter was dry and sunny in Dublin, and Dubliners were joyful as always during the holidays. The sales of the chocolate eggs were record high, which may have been a pleasant surprise to the chocolate producers in the context of economic difficulties.

Indeed, the economy and finance is a major preoccupation of the Irish government and citizens (or residents, to put it more correctly, given that up to 100 thousand Lithuanians now live and work in Ireland and share the same concerns as Irish, along with Poles, Latvians and other communities).

The economic developments in Ireland – member of the euro zone – resonate far beyond its shores in EU capitals and globally, due to the potential effect which the Irish situation may have on the common currency.

Since 1973 when Ireland became a member of the EU, its economic and social development up to 2008 was largely successful, and was regarded as a model to other countries undergoing transformation, particularly in East Central Europe. The notion of the Celtic Tiger was at the core of brand Ireland, which implied robust economic growth, export led economy, and tax regime and business climate conducive to attracting foreign direct investment (FDI).

Ireland became and still is a rich country: gross domestic product (GDP) per capita in Ireland stood at 48 % above EU average in 2007.
2008 may be regarded as the turning point. The real estate bubble collapsed. The crisis in this over expanded sector adversely affected the functioning of the banking system which was further aggravated by the global financial crisis. In September 2008 the Irish government decided to guarantee Irish banks' deposits and debts to calm investor concern. The majority of Irish banks were effectively nationalized.

This had a negative effect on growth, public finance and employment. In 2009 the value of the GDP fell by 11,3 %, the public balance deficit was 14,3 %, larger than in any other EU member state. Government debt increased to 64 %, up from 25 % in 2007. Unemployment reached 13,6 %.
In November 2010 Ireland entered a loan arrangement with EU/IMF after the interest of borrowing on markets hit a height of 9 %.

The terms of the agreement foresaw an 85 billion loan and set out compulsory conditions in the areas of fiscal consolidation, structural reform, and restructuring of the banking system. It was agreed that the government would cut spending and increase taxes with a view to reach the 3% budget deficit target in 2014. This will require slashing government spending by 15 billion in 2011 alone.

Lithuania supported Ireland at the EU level with regard to the measures directed to assist Ireland to overcome economic difficulties. EU solidarity is important in ensuring economic and financial stability across the EU, which is a key to the sustainable growth of the Lithuanian economy.

Are economic developments of Lithuania and Ireland comparable? Yes, but only to some extent. The economy contracted substantially in Lithuania in 2009 (by 14,8 %), also partly due to the real estate crisis. The banking system remained stable in Lithuania although the credit crunch to businesses was present both in Lithuania and Ireland. Government deficit in Lithuania was much lower - at 29,5% and unemployment was almost identical in both countries (13,7 % in Lithuania, 13,6 % in Ireland) in 2009.

When it comes to government deficit and debt, Lithuania is in a more favourable position. Latest Eurostat figures reveal that in 2010 the largest government deficit among EU27 in percentage of GDP was recorded in Ireland and stood at -32.4% (in Lithuania -7.1%). At the end of 2010, the ratio of government debt to GDP was 38.2% Lithuania and 96.2% Ireland.
Also, importantly, both countries undertook large scale programmes of consolidating public finances, however Ireland have also resorted to the assistance from EU/IMF.

GDP contracted by 1,6 % in Ireland in 2010, and grew by 1,3 per cent in Lithuania. The GDP increased by 4,8 % in Lithuania in the last quarter of 2010. It is expected that the economy in Ireland will turn to growth in 2011.
Although the Irish economy faces important challenges, the economic fundamentals are regarded as strong. The new Irish government, which enjoys support from its citizens, is committed to cutting government’s deficit, increasing competitiveness and creating jobs. Ireland is an open, deregulated economy, with a strong export oriented multi-national sector. Many international companies form the US and elsewhere run their businesses form headquarters in Ireland in sector such as IT, pharmaceuticals, financial services and others.

Working directly with multinationals located in Ireland is an important area of work for the Lithuanian embassy in Dublin in co-operation with various economic agencies in Lithuania in an effort by the Lithuanian government to win FDI.

Apart from the economic affairs, the political relations between Lithuania and Ireland are very close and are set to intensify. The visit to Ireland by the Lithuanian President Dalia Grybauskaitė in May 2010 was an acknowledgement of close ties and an important common agenda ahead of us. Ireland will succeed Lithuania as President-in-Office of the Organization for Security and Co-operation in Europe (OSCE) in 2012.
Also, in 2013 Ireland and Lithuania will hold presidencies of the EU for six consecutive months (Ireland in the first semester of 2013, and Lithuania in second half of 2013). Together with Greece which will succeed Lithuania at the helm of the EU in the beginning of 2014, these three countries will form the so-called EU troika, which has a special responsibility in leading the EU for 18 months.

EU presidency is a complex challenge but also a unique opportunity for Lithuania in further establishing itself as an ambitious and constructive EU member state. EU presidency involves a major preparation in terms of planning. Close co-ordination with Irish partners will be indispensible, and work in that regard is well-underway.

Intensive work in the political domain is an opportunity to further develop cultural and human links between the two countries, increase mutual awareness about Lithuanian and Irish societies.

Of course, the greatest bond which connects Lithuania and Ireland is a vibrant Lithuanian community in Ireland. It is rightly regarded by the Lithuanian government as a most important partner is fostering human and other links between the two countries.

Data in the article from www.cso.ie, www.stat.gov.lt, http://epp.eurostat.ec.europa.eu/portal/page/portal/eurostat/home and www.ukmin.lt.