After years of economic calm, Ireland could be facing a storm. Are we better prepared this time?

Irish Times

08-06-2025

On the day that Brian Cowen was elected taoiseach on May 7th, 2008, one of the headlines in The Irish Times
read
'Poor old unlucky
Bertie
'.
The Mahon tribunal had stampeded through Ahern's murky personal finances with a coach and four earlier that year, and Ahern had no choice but to fall on his sword.
His successor Brian Cowen had been
Fianna Fáil
's dauphin prince for a decade. In a for-once becalmed and benign Dáil, he listened as party leaders heaped praise on him and wished him well. In his own speech, he said he wanted to care for the less well-off in society and create 'caring and compassionate communities'.
That day was as good as it got for Cowen. A retrospective headline could have read: 'Poor old unlucky Biffo'. And as for Bertie? He dodged a bullet that day. The first slate clouds of the coming storm were massing just over the horizon.
READ MORE
There were some small signs already evident. The State's revenues in the first four months of the year had fallen alarmingly. Yet, the Versailles levels of spending continued apace.
[
Is this Government repeating the mistakes of 2008?
Opens in new window
]
That was only the beginning of the tragedy that was to unfold for Cowen and for the State. By June came the confirmation of a slump in house sales, and a significant downturn in bank profitability. The late Brian Lenihan mused that month it was just his luck to become minister for finance at the moment the building boom had come a 'shuddering halt'. The government began to batten down the hatches but the hurricane had already made landfall.
Those who write about politics love the phrase of George Santayana's that 'those who cannot remember the past are condemned to repeat it.'
Since the economic crash there have been several extraordinary events that might have presented credible threats to political stability across Ireland, Europe and the world: Brexit; the Covid-19 pandemic; the war in Ukraine; the energy crisis; the terrible events of October 7th and the unspeakable annihilation of Gaza by Israel. Now we have a bellicose Trump presidency, brimful with threats and tariffs.
[
Corporate tax take tumbles 30% for May with €1.1bn less over same month last year
Opens in new window
]
The State has somehow managed to weather all those storms. That has been partly thanks to huge windfalls from corporation tax that have given Ireland a buffer from the worst impacts of Covid and the cost-of-living crisis. Annual once-off payments for households became the norm during the last Dáil term.
Seemingly, our economy still retains the knack of defying gravity. Two sets of figures, published on Thursday, suggest that all looks good for the public finances. The Department of Finance confirmed there has been an increase of 3.6 per cent in tax revenue so far this year. Economic growth also looks strong. According to CSO data, gross domestic product (GDP) grew by almost 10 per cent in the first quarter of 2025, driven by a surge in exports.
When President Trump started sabre-rattling about
tariffs
earlier this year, many people discovered for the first time the kind of astronomical figures associated with multinationals based here. Exports to the US from Ireland were worth €68 billion in 2024, two-thirds of which came from pharmaceuticals and medical devices.
Beneath that veneer lies a more complicated scenario. Since 2011 there have been two parallel Irish economies, a global one and a domestic one. During the best years, GDP figures have been spectacular. But the picture was distorted. That part of the economy that doesn't feature gleaming towers in the Docklands, space-age pharmaceutical companies or aircraft leasing was lagging behind dramatically. This economy is made up of PAYE employees, or people working in less glamorous sectors, and those in the gig economy. Their reality has been a constant struggle to pay bills as prices escalate, to meet childcare costs, to scrape together enough to pay the mortgage or rent and put petrol in their cars.
A new category, modified domestic demand (MDD), was created to better reflect that domestic economy. For example, when you strip out the multinationals, growth in MDD was less than 1 per cent in the first quarter of 2025. Not tanking by any means. But slowing.
Tax take also seems to be holding up overall in 2025. However, the picture is complicated by the Apple tax money. When that is excluded, corporation tax is no longer up 18 per cent, but is more than 9 per cent down on the same period last year. Is that a sign that that ATM is finally running out of cash?
It feels hard to escape from the sense that after years of generally smooth cruising, we are now facing turbulence. You can see signs of that wariness at institutional level. The Government has said categorically there will be no once-off payments this year. It has also revoked a plan to extend statutory sick-leave entitlements by two days. Sensibly, too, it has began an urgent all-hands-on-deck diplomatic and trade offensive to diversify away from the US and open up new markets elsewhere.
One thing that has been reminiscent of the Celtic Tiger over the past decade is the willingness of governments to spend a lot of money. The capital housing budget has had a fivefold increase from €1.2 billion in 2017 to €6 billion in 2025. The health budget has almost doubled in the same period, up from €14.6 billion in 2017 to €25.8 billion this year. Overall State expenditure topped €100 billion for the first time in 2024. That's all well and good, unless we encounter a 2008-style collapse in revenue.
Are we better prepared for the coming storm than 17 years ago? The answer is probably yes but even that might not inure us.