Austerity measures - the Irish experience

Strikes in Republic of Ireland
Image caption Workers' strikes had little impact on the Irish government's public spending cuts

Next month the UK government is expected to outline where the axe will fall as it tries to claw back the public money it spent in its attempt to shore up the economy because of the credit crunch.

South of the Irish border they know all about the pain of cutbacks.

It is estimated the Republic of Ireland is between 18 months and two years ahead of the UK in terms of grappling with government over-spending.

Conor McDonald sits in his half-finished kitchen in north Dublin with his three-month-old son, Senan, on his lap taking the bottle. His older son, 20-month-old Finn, plays around his feet.

The house he bought at the height of the market for nearly £300,000 has lost 40% of its value.

Earning the equivalent of just over £20,000 per year as a public servant with the Irish tax authorities he reckons his income has been cut by 17% over the last two years.

'In trouble'

He and his partner have had to cut back big time on their spending.

"Our electricity and heating bill has had to be brought right down - we use cold water primarily to wash and all luxuries have been wiped out.

Image caption The Irish finance minister, Brian Lenihan, called his cuts patriotic

"On top of that we've had to cut down on our travel expenses. We've been walking and using bicycles instead of other options," he said.

The Republic's economy and banks were in trouble even before the start of the worldwide credit crunch.

The Irish government was forced to introduce an emergency budget in October 2008 with the finance minister, Brian Lenihan, describing his proposals as a "call to patriotic action".

But workers were unimpressed.

They took to the streets to protest, inspired by the over 70s who successfully resisted attempts to take away their automatic right to a medical card, a card which gives them access to free health care.

One-day strikes were called but all to no effect - this time round the government was not for turning.


With the gap between money raised and spent growing alarmingly and the cost of borrowing increasing dramatically the Fianna Fail/Green coalition was forced into pay cutbacks.

As a member of the Eurozone, the Republic did not have the option of a currency devaluation or printing extra money, unlike the UK.

In the last two years the Irish economy has slumped by 13% and unemployment has risen from just over 4% to nearly 14%.

The country has gone from having a budget surplus to being one of the biggest borrowers in the European Union - partly because of the bank bail outs which are in turn linked to the construction crisis.

House prices have fallen by an average 40% and inflation has given way to deflation with prices down 7% on two years ago.

Professor John Fitzgerald of the Economic and Social Research Institute says that based on past experience the Irish believe in front-loading the pain.

"Hopefully, we'll be through the worst in 2012 - in Britain this is going to go on for some time to come.

"Our experience in the 1980s, and all politicians have learned from that experience, is that you're better doing it fast rather than delaying," he added.


The lengthening dole queues, unfinished housing estates and closed down shops are of proof the Republic's economic pain.

While the coalition and most economists believe short-term suffering is necessary, others rather like the Labour party in the UK, caution against trying to do too much too quickly.

David Begg, who is the General Secretary of the Irish Congress of Trade Unions, believes Irish government policies are likely to lead to further rises in unemployment.

He said: "The real danger for us is that without growth in the economy we stand to run the risk of falling into the type of 10 year slump that affected the Japanese in the 1990s."

Paul Krugman, the Nobel Laureate and New York Times economics correspondent, has also cast doubt on whether the markets are really rewarding Ireland for its austerity measures.

With the Irish coalition trying to get its finances back on an even keel by 2014 people, like Conor McDonald, are steeling themselves for the December budget.

They know that more tax rises, probably indirect stealth ones, and more government cutbacks are certainties for several years to come.

For people living in Northern Ireland this could well be a case of 'welcome to your future'.