Business, Finance & Economics

Hacking away at the Celtic Tiger


DUBLIN — The Celtic Tiger is dead. Now its cubs are facing death by a thousand cuts, or "snips," to use the colloquial lexicon of post-boom Ireland.

Faced with a budget deficit of $8.5 billion this year, the government set up a board to establish where sweeping public spending cuts could be made. Known colloquially as An Bord Snip ("an bord" is Irish for "the board") it has, after months of deliberation, identified where the scissors should be wielded.

Many government-funded bodies that lived well during the Celtic Tiger years — the period of rapid expansion that began in the mid-1990s and ended with the property crash of last year — are facing extinction. An Bord Snip’s targets for abolition range from the Department for Arts, Sports and Tourism to the Irish Film Board and the Army’s equestrian team. Among the most controversial of its recommendations are a reduction of welfare payments by 5 percent, which would bring savings of almost $1.4 billion and a cut in the child benefit that would save $710 million.

But almost every sector of society would feel the pain of the snips. Schools would have fewer teachers, art galleries and museums would start charging entrance fees, half the country’s police stations would be closed, some local governments would be abolished, several thousand civil servants would be paid off, potholes on country roads would be left unfilled and allowances for members of parliament would be slashed.

That last measure is about the only one popular with Irish voters, who generally blame politicians, bankers and property developers for the economic mess. The chairman of An Bord Snip, economist Colm McCarthy, even suggested abolition of the upper chamber of parliament, the Senate, dismissed by many as a talking shop (whose members love visiting the United States, where the title "senator" commands more respect than in Dublin).

The projected cuts do not stop at home. The Department of Foreign Affairs has been told it must cut back the diplomatic service, which includes 69 embassies and seven consulates, four of them in the U.S. (in New York, Boston, Chicago and San Francisco, where there are large Irish-American communities).

Formally known as the “Special Group on Public Service Numbers and Expenditure Programs,” An Bord Snip made public its two-volume report last week and since then the country has been in an uproar.

Thousands of angry farmers besieged the Cavan office of Minister for Agriculture Brendan Smith to protest new cuts in agriculture subsidies. Garry Hynes, chairwoman of the Arts Council, called the proposed abolition of the Film Board “an outrageous and an extraordinary insult” to Irish filmmakers. Unemployed workers and parents of special needs children wept with anguish on radio talk shows at the prospect of losing income and services.

Meanwhile, the Irish National Organisation of the Unemployed complained that the less well-off in society were being asked “to pay for the failings of the Celtic Tiger.” The Irish Primary Principals Network forecast that many schools would go bankrupt. Trade Unions and interest groups across the country are gearing up for a fight, as the beleaguered Irish cabinet considers how many of the scores of recommended cuts to implement.

Prime Minister Brian Cowen warned that no area of public expenditure would be immune from the scissors. He has little alternative but to accept the bulk of the recommendations because of the dire state of the public finances due to a collapse in tax revenue associated with the bursting of the property bubble and the contraction of the economy by 8-10 percent this year.

Government spending in 2009 will be $104 billion and income only $75 billion. Ireland faces turbulent times ahead and the government, an uneasy coalition of Fianna Fail and the tiny Green Party, could fall. But the alternative to spending cuts would be a return to the era of high income taxes, which would stall a return to growth.

“Hard, bitter choices will have to be taken,” said Mark Hennessy, political correspondent for The Irish Times, “whether by a government chosen by the Irish people — or by the International Monetary Fund.”

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