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Saturday, May 10, 2008

Ireland: The End of the Miracle by Kerry Capell FROM BusinessWeek

Once the envy of Europe, Ireland's economy is set to grow at a crawl this year. Joblessness is spiking to 6%. Exporters, one of the country's biggest growth engines, are getting clobbered. The rising cost of doing business is leading some multinationals to rethink their commitment to Ireland. House prices, which rose to record levels on the back of extraordinary economic growth, are plummeting. "Ireland's competitiveness has markedly deteriorated," says Jim Power, chief economist at the Dublin investment advisory firm Friends First.

This sorry tale is the flip side of the Irish miracle. Starting more than three decades ago, policymakers slashed corporate taxes, pumped money into higher education, deregulated aggressively, and courted multinationals desperate to escape the slow-growth, red-tape environment of Continental Europe. The strategy worked brilliantly: Ireland's economy expanded an average of 6% annually for a decade or more.

Now, exports are slowing as the euro surges against the dollar and sterling, the currencies of Ireland's two biggest trading partners.

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