Irish tail wagging euro zone dog again

By any metric – employment, tax, output – the Irish economy has become increasingly dependent on multinationals. The output numbers are so big they’re distorting not just Ireland’s national accounts but the euro zone’s. The bloc as a whole was estimated to have narrowly avoided a contraction in headline growth in the final quarter of last year and possibly a recession because of strong multinational-led growth here.

This was, however, later amended with the Irish growth number revised down. but the notion of the tail wagging the dog was implanted in people’s minds. On Monday we got another example of it.

Output data, published by Eurostat, indicated industrial activity across the bloc in March had slumped by a greater-than-expected 4.1 per cent principally on the back of a slump in manufacturing activity here and a slowdown in German car production. Industrial activity here is dominated by pharma and medtech multinationals.

Eurostat noted that Irish industrial production fell 26.3 per cent in March, the sharpest fall of any member state. It said the Central Statistics Office (CSO) here was “carrying out a review of the seasonal adjustment methodology for industrial production”.

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The next largest monthly decreases were registered in Sweden (-3.9 per cent) and Germany (-3.1 per cent). The latter was linked to a decline in German car output.

While multinational investment has reaped significant dividends in terms of employment and tax it has also created significant strains within the Irish economy. Creaking infrastructure in housing, transport and energy are now threatening to erode competitiveness and have ultimately made urban centres here difficult to navigate physically and financially.

The Government is under significant pressure to use an expected €65 billion in budgetary surpluses over the next three years, principally on the back of windfall tax receipts from multinationals, to remedy some of these deficits. Easier said than done as the economy is close to full capacity and we have a history of mismanaging big capital projects.