By Philip Inman
GDP fell 0.2% in the final quarter of last year to put Ireland officially into recession, alongside Belgium, the Netherlands, Italy, Portugal and Greece
Ireland's central bank governor, Patrick Honohan, is expected to ask for permission to delay a debt payment. Photograph: Julien Behal/PA
Ireland ended last year in recession, according to figures on Thursday, after an export drive was undermined by the slowdown in global demand.
A dip of 0.2% in GDP in the last quarter of 2011 signalled the official end of Dublin’s recovery phase following a steep fall in the third quarter.
Ireland joins fellow eurozone countries Belgium, the Netherlands, Italy, Portugal and Greece in recession.
The Irish finance minister, Michael Noonan, had promised a swift recovery last year after a string of record export figures appeared to show foreign trade would galvanise the economy.
However, the euro crisis and a slowdown in some key export markets dampened demand for Irish goods.
Dublin has focused on exports after it was forced to impose a dramatic squeeze on public spending by Brussels as the price of a multibillion-euro rescue package. The ongoing housing crisis that resulted from the largest house price boom in the eurozone has also restricted domestic demand.
Such is the poor state of the Dublin government’s finances that Irish central bank governor Patrick Honohan is expected to ask the European Central Bank’s governing council for permission to delay a cash payment on its banking debt.
The state is due to make a €3.1bn (£2.6bn) payment to the former Anglo Irish Bank, which is then supposed to use the funds to reduce its emergency borrowings from the country’s central bank.
Instead, Anglo Irish, which is a zombie bank closed to new business, may use the funds to buy a new Irish government bond, recycling the cash back to the state. The bond can then be used to tap funding from the ECB.
Described as an accounting trick by some economists, it allows Dublin to use ECB money to prop up its bank’s rather than its own.
Dublin faces some of the biggest debts from its banking crisis of any eurozone country after a splurge of lending in the boom years. The decision to nationalise all the major bank groups has landed the government with all their debts, which need to be serviced to avoid a default.
Noonan is expected to focus on the growth in GDP over the whole year and the recovery in the fourth quarter from the 1.1% contraction in the third quarter, which was revised up from a previously disastrous 1.9% fall in output.
Over the 12 months to December gross domestic product rose by 0.7% in 2011, ending three successive years of declines that saw the economy shrink by a cumulative 10.4%.
Analysts had expected GDP to rise by 0.4% in the final months of last year and 0.9% for the year as a whole, just shy of the 1% the government had pencilled into its fiscal plans.
Gross national product, seen by some economists as a more accurate indicator of the state of the economy because it strips out the earnings of Irish-based multinationals, fell 2.2% in October-December, compared with a 1.5% increase expected by economists polled by Reuters.
Ireland’s current account surplus came in at €796m in the fourth quarter.
From the Guardian
Subscribe in a reader
Thursday 22 March. the Mahon tribunal issued its findings. this took 15 years. about political financial corruption by property developers and speculators. with political ties to the main political parties. Fianna Fail Fine Gael which has costed Irish tax payers millions. ex European Comissioner Padraig Flynn. Fianna Fail. Albert Reynolds. Ray Burke. Liam Lawlor who has since deceased after having been in a roda accident in Moscow. Bertie Ahern.
yes folks the Irish political elite in 2012. are issuing us with a poll tax, like the one in England during the 1990s. people are expected to register for their House Hold Tax by 31 March. at the cost of 100 euro. there has been a campaign to oppose this tax
http://www.nohouseholdtax.org