Visitors Raise Irish Hopes for an End to Financial Crisis

The people of Ireland cheered up a bit following the back to back visits of Great Britain’s Queen Elizabeth II, and the President of the United States, Barack Obama, or O’bama as the name appeared in Ireland.

No, neither visitor pulled a €100 billion [app. $142 billion] out of their pockets to bail out Ireland’s mountainous debts, but they did provide some much appreciated confidence building.

The Queen was at her political artist’s best, frequently wearing green, a gown with hand-embroidered shamrocks, and visiting the sacred memorial in Dublin where the men and women who fought and died for the country’s freedom are commemorated, as well as Croke Park, the site of a massacre by British troops in 1920. She even walked among the crowds in Cork, the birthplace of Michael Collins, who led the last, and the only successful, Irish rebellion.

President Obama’s briefer visit – he was in Ireland less than 24 hours – was similarly successful. He visited Moneygall, the birthplace of his great-great-great, who emigrated to the U.S. in the 1850’s. Obama even drank – and paid for – a pint of Guinness (the Queen didn’t drink the glass of the brown stuff she was offered).

While Irish media focused on the high profile visitors, an equally important, if somewhat lower profile, event took place at the Royal Dublin Society’s Concert Hall in Dublin’s Ballsbridge, a few blocks from the U.S. Embassy. The 2011 European Insurance Forum (EIF) featured a number of high level industry professionals, presenting their take on the economic crisis, the first quarter’s catastrophe events, Solvency II and its potential impact, as well as other topics.

In his keynote speech John Bruton, Ireland’s former Taoiseach (Prime Minister), as well as Finance Minister, addressed the country’s financial difficulties directly. As the Chairman of Ireland’s International Financial Services Center (IFSC), he’s been at the forefront of efforts to keep the country from sinking further into recession. He’s also a key figure in efforts to restart the growth engine, which following the collapse of Irish banks, and the resulting government bail-out, brought an end to Ireland’s era of prosperity.

One of the remaining bright spots, however, remains the country’s insurance industry, which continues to contribute a great deal to the economy, and has continued to grow in spite of the recession. How important is it? “Ten percent of all the reinsurance that’s written in the world is written out of this country,” Bruton said. He also noted that many brokers, insurers and reinsurers had located their back office processing and claims handling centers in Ireland.

Bruton also detailed the efforts the country has taken to recover. He cited the “unequivocal endorsement by the IMF of measures Ireland has taken, which according to Ajai Chopra, Deputy Director of the IMF’s European Department, constitute a “decisive approach on the banking situation.” They have “doubled existing buffers against possible losses through 2013 and beyond.” He said “Irish banks are now better capitalized than the banks of most other EU countries, including in particular the bigger EU countries banks.”

On the divisive issue of Ireland’s corporate tax rate – a relatively low 12.5 percent – Bruton noted that Chopra agreed with Ireland’s position that an increase in its corporate tax “was not of the agreed EU/IMF program, because,” as he put it, “such an increase would not be consistent with the overall goal of the program of sustaining…growth.”

In that context he took a swipe and French Finance Minister Christine Lagarde’s well publicized view that Ireland should raise its corporate tax rate. He reminded everyone that in her position as French finance minister she had endorsed the program to help Ireland, and he pointed out that the revenues from corporate taxes are actually above what had been forecast, and are contributing more, not less, than had been expected.

Bruton also stressed that all of the countries in the EU were dependent on one another, and had all, to a lesser or greater extent, shared in the “artificially cheap imports – China – and the artificially low interest rates” boom that set off the financial crisis. He said that, as it had taken around “seven years to build up,” it “won’t be resolved in much less time.”

For such a long term solution to be accomplished it will require the two leaders of the Euro zone, Germany and France, to lead the way in making the European experiment, “a voluntary pooling of sovereignty,” work. He stressed that “our single currency and our single market are the two essential pillars;” therefore, strengthening those institutions is vital to bolster European interdependence, and the economic recovery of countries, such as Ireland, that have been brutally impacted by the financial crisis.

Topics USA Europe