Last May I wrote, “As we headed to JFK early on Monday morning for our BA flight to London, we learned that over the weekend the Eurozone leaders had fashioned a rescue plan that went well beyond Greece.The world markets remained concerned that the new austerity measures imposed on the PIIGS (Portugal, Ireland, Italy, Greece & Spain) could lead to another recession in Europe while the world slowly recovers from the Great Recession…This was clearly a historic week on the continent and in the United Kingdom. There is a new determination to deal with the structural issues that have left most of the countries with debt loads that the global bond markets cannot support in the long run, and there is a new resolve by these countries to put themselves on a course that will support sustainable long-term growth.” I closed with, “Mary Claire and I have flown to Dublin for the weekend and will return to New York on Monday evening.” While we had a wonderful three-day weekend in Dublin, which has a special charm and many excellent restaurants, I did not report on the one thing that caused me concern. As we left dinner on Saturday evening and looked for a cab to take us back to our hotel, I saw a line of idle cabs longer than I had ever seen in New York City or London. After we got into a cab, I asked the driver why there were so many cabs available. He responded that the vast majority of the drivers had worked the past several years in the construction trades and the only work they could find now was driving a cab, but there was not enough demand for them to earn a fraction of their previous wages. It struck me then that the recovery of the housing and commercial construction markets around the globe would take a long time and the human cost would be very high.
Against the backdrop of street revolutions sweeping through the Middle East and eastern Africa and with the world focused this week on the bloodshed in the streets of Tripoli, where Colonel Qadhafi appears unwilling to leave and clings to power, vowing to fight unto his death, Ireland went to the polls this week. The Irish delivered a Democratic revolution, dealing a resounding defeat to the Fianna Fail party, which has ruled Ireland for most of the past 85 years and has been in power for the past 13 years during the rise and collapse of the Celtic Tiger. (WSJ 2/26/2011)
Fine Gael, a center right party, will most likely form a coalition government with the left-of-center Labour Party, based on all the early polling results. Fine Gael’s leader, Enda Kenny, appears likely to be the next Prime Minister. (FT 2/26/2011) He will inherit a country where the voters are clearly unhappy with the burden they have been left with after the near collapse of their banking system and the bailout that was agreed to with the European Union and Central Bank. I trust that there will be much talk of renegotiation, but this will be an unlikely outcome and the austerity programs will remain a way of life for many years.
Last week Guy Chazan reported in the Wall Street Journal, The people of Ireland go to the polls Friday to deliver what’s expected to be a knockout blow to the governing party. But many are choosing to vote in a traditional Irish fashion: with their feet. Tens of thousands are joining in a new wave of emigration, turning their backs on a country mired in economic malaise….Forced emigration was long Ireland’s curse. A million fled in the decade after the great potato famine of the mid-19th century, which killed some 800,000 people. There was a huge exodus a hundred years later, with thousands lured away by a building boom in the U.K. Another mass migration followed in the 1980s.” (Irish Remedy for Hard Times: Leaving,” WSJ 2/24/2011) Many are emigrating to the U.K., Australia, New Zealand and Canada, as well as other European Union countries. Once again, we are seeing that jobs will be the defining issue of global elections for the democratic governments trying to recover from the Great Recession. Against this backdrop, we will hear arguments regarding deficit reduction and austerity programs versus Keynesian economics. The right balance will define those who gain power and try to advance the recovery versus those who are thrown out by the voters. I expect the recovery to continue, but the unemployment rates will remain stubbornly high in the U.S., the U.K. and on the Continent until housing and commercial construction recover.