Ireland: Roar of the Celtic euro-tiger

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Ireland: Roar of the Celtic euro-tiger

Ireland has transformed its economy in recent years, luring multinational companies by offering low taxes and well-educated labour. Its participation in European economic and monetary union has also been an attraction. The economy has boomed. Ireland is running budget surpluses and paying down its debt out of privatization proceeds. But being a small nation in euroland also brings difficulties, like wholly inappropriate interest rates. The Irish economic miracle could be heading for disaster -- extraordinary rates of growth could well lead on to rampant inflation. Nick Kochan reports

Ireland's innovative bond exchange


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The Celtic tiger is a good nickname for Ireland's economy which continues to roar ahead. Unfortunately, like the tiger economies of south-east Asia, rapid growth rates can bring troubles in their wake. Ireland - which has had almost double-digit GDP growth for each of the last five years - now has to try to curb incipient inflation.

The trouble for Ireland is that interest rates are set elsewhere and the present euro zone rate at 3% is too low. Maurice O'Connell, governor of the Central Bank of Ireland, admits that with rates set by the European Central Bank, his hands are tied. "The Irish economy is at a very different stage of the cycle to everyone else in Emu. So, what may be good for the euro zone as a whole may not necessarily be to Ireland's advantage," he says.

"It will take some time to see the advantages of Emu. But if you're trying to manage the exchange rate of a small country with conflicting forces, such as sterling on the one side and the euro zone bloc on the other, it's a difficult world that we live in."


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