Republic of Ireland's Q4 contraction exceeds worst estimates

The famous Irish luck seems in short supply as GDP shrinks 7.5% year on year...

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Last Updated: 06 Nov 2012

Once proudly referred to as the Celtic Tiger due to its economic prowess, the first eurozone country to go into recession in 2008 is now more likely to be compared to a flea-ridden moggy, as its fourth-quarter contraction exceeds the worst estimates.

After suffering the indignity of having an unauthorised nude painting of himself hung in the Royal Hibernian Academy, things have gone from bad to worse for Irish Taoiseach, Brian Cowen.

His country's GDP dropped 2.3% in 2008, its first decline since 1983. Economists are now predicting further doom and gloom with Ireland's budget deficit expected to reach double figures by the end of the year.

Add a 9.7% annual slump in house prices and an unprecedented decrease in consumer spending caused by heavy deflation and it soon becomes clear that it will take more than a few pints of Guinness to forget this crisis.

With headwinds blowing stronger than expected, Cowen must decide whether to implement spending cuts or create tax hikes to ease the crisis. The latter option would be risky if Ireland, a country heavily reliant on inward investment, is to hold onto its status as a low tax haven for businesses and encourage foreign firms to stay put.

Fortunately justice minister Dermot Ahern was on hand with some famous Irish straight-talking. 'We are endeavouring to ensure that whatever we do we don't completely crucify the economy,' he said.

It's hard to argue with such steadfast words, but a large rock will have to be shifted if Ireland is to miraculously emerge from its fiscal tomb.

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