Having embraced severe belt-tightening to mend its tattered finances, Ireland is showing glimmers of a turnaround. A year after it received a 67.5 billion euro bailout, or about $90 billion at current exchange rates, modest growth has returned and the budget deficit is shrinking.
But the effects of austerity have pummeled Ireland’s fragile economy, leaving scars that are likely to take years to heal. Nearly 40,000 Irish have fled the country this year alone in search of a brighter future elsewhere; the trend is expected to continue.
“This is still an insolvent economy,” said Constantin Gurdgiev, an economist and lecturer at Trinity College in Dublin. “Just because we’re playing a good-boy role and not making noises like the Greeks doesn’t mean Ireland is healthy.”
The German chancellor, Angela Merkel, recently praised the Irish prime minister, Enda Kenny, for setting an “outstanding example,” while the French president, Nicolas Sarkozy, declared that Ireland was already “almost out of the crisis.”
Underneath the surface, however, the grinding reality of Irish life belies those glowing commendations.
Salaries of nurses, professors and other public sector workers have been cut around 20 percent. A range of taxes, including on housing and water, have increased. Investment in public works is virtually moribund.
On Monday and Tuesday, Mr. Kenny’s government is announcing an additional 3.8 billion euros in tax increases and spending cuts for 2012 that will affect health care, social protections and child benefits.
Retail sales fell 3.8 percent in October from a year earlier as spending was down even on things like school textbooks, shoes and other basic goods.
At a Spar convenience store in the center of Dublin, Samantha O’Donnell, a mother of two, filled her shopping basket with some necessities, then put a few back on the shelf.
“A lot of people are just trying to get by week to week,” said Mrs. O’Donnell, who said her salary as a nursing assistant had been cut.
To Sean Kay, a professor of politics at Ohio Wesleyan University in Delaware, Ohio, and the author of a recent book examining Ireland’s crisis, Mrs. O’Donnell’s experience is typical. “The Irish are being praised for doing what they were asked to do, which is important for bringing investors back to the country,” he said. “But for the Irish people, it’s not paying off.”
There are signs of improvement. Compared with the previous year, exports are up 5.4 percent for the first nine months of 2011, driven by gains from Pfizer, Intel, SAP and other multinational companies that were drawn to Ireland in the 1990s and 2000s by its low taxes, well-educated English-speaking work force and access to the European market. New information technology companies like LinkedIn and Facebook have recently arrived.
Prospects for local technology companies are improving, too. Brian Farrell founded Tethras with a partner three years ago to develop mobile applications for smartphones. He now has 16 employees and hopes to double his work force in the next 18 months.
“Every time you turn the radio on, companies in I.T. are hiring,” Mr. Farrell said, referring to information technology.
Gross domestic product grew 1.2 percent in the second quarter from a year earlier, compared with a decline of 0.4 percent for all of 2010 and 7 percent in 2009.
The interest rates that Ireland would pay its international creditors if it were not on a financial lifeline have also fallen, to 8.7 percent today from 14 percent in August, in part because investors hope that European policy makers will resolve the broader debt crisis.
But that is still above the level that led Ireland to seek a bailout and too high to allow for sustainable finances.
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