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February 19, 2003

Ireland, Once a Celtic Tiger, Slackens Its Stride


YOUGHAL, Ireland — The boom that doubled the size of Ireland's economy in the 1990's and changed the nation's self-image from waif to whiz kid has slowed markedly, the victim of a worldwide technology bust and membership in a European club that, like most, pays more attention to its heavyweights than its upstarts.

"The Irish economy is not a Celtic tiger anymore," said Roisin Taggart, a manager in Dublin's upscale Brown Thomas department store. "It's a pussycat."

The expansion transformed Ireland, drawing in hundreds of foreign technology companies, reversing decades of Irish migration abroad in search of jobs and drawing thousands of young Europeans to a country that had become a regional hot spot.

But like the global economy, Ireland's has taken a remarkable U-turn, one apparent not just in big cities but in towns like Youghal (pronounced yawl), a port-cum-resort on the southern coast in County Cork.

A generation ago, when Youghal faced looming recession, its movers and shakers — from priests to pub owners, 700 in all — gathered in the church hall to pray all night by candlelight for better times. Six months later, said Paddy Linehan, 83, who helped arrange that 1979 vigil, five new companies came to town.

These days, it might take more than prayers. In the last two months, two of the biggest technology employers in this town of 7,500 have announced plans to close plants that employ some 400 people in jobs worth $13 million a year in salaries — a big chunk of its livelihood.

"It's devastated us, really," said Mary Linehan-Foley, the mayor. "And there doesn't seem to be light at the end of the tunnel." Dependent on exports to Britain and the United States, and propelled by investment by American and other foreign companies, Ireland was especially vulnerable to the worldwide high-technology meltdown that has helped cut growth to a fraction of its peak in the 1990's and stripped away thousands of jobs.

Yet, locked into the euro single currency, and to low interest rates set by the European Central Bank, the authorities have been unable to tailor their own economy to head off inflation, now running at more than twice the European average, and pushing up wages and other costs.

That has made Ireland far less of a draw to outside investors, even as foreign companies looking for low-cost locations begin to look hard at East European countries like Poland, Hungary and the Czech Republic, which are poised to join the European Union next year.

"This is when we see whether we have a new economy in Ireland or not," said Austin Hughes, chief economist at IIB Bank in Dublin.

That is a question that preoccupies many people here in Youghal.

In December, Artesyn Technologies announced that between March and September this year it would close a plant making power converters and employing 160 people, transferring operations to China. Then, on Feb. 5, Thomson Multimédia of France said that by the end of March it would shut down its Technicolor subsidiary, which processes DVD's for a growing market in Britain. Significantly, the French company said it would transfer its activities from Youghal to factories it acquired in Wales and Poland as part of its takeover of Technicolor last year.

"The general feeling is not positive, and there's a lot of worries about the way jobs are going to Eastern Europe," said John Dempsey, 35, one of the few Technicolor workers who would talk to a reporter. Some workers hid their faces, apparently fearful that they would be singled out for lower severance payments if they were identified. Danielle Jacob, a Technicolor spokeswoman, denied that the company had silenced its staff but said it would not allow interviews of workers inside the plant.

The closings have brought a wider gloom to a town, like many in Ireland, already suffering from the global slowdown. "The shops aren't so busy. The restaurants aren't so full," said Mary Cotter, 28, a nurse. "It's very difficult for men in particular to get jobs, and these closures will have a huge impact."

Of course, many here would say that with the tourism that swells the town to 12,500 in summer, and with textile and carpet businesses providing some work, Youghal will survive well enough — especially if the government steps in with grants and incentives to lure other companies here.

But the latest official figures showed 10,000 job losses in Ireland over the last year, bringing the total number collecting unemployment compensation to 167,000, and Deputy Prime Minister Mary Harney said that more job cuts were likely.

Across the land, that is hardly good news for people like Lena Beug, a 27-year-old television designer who left Ireland five years ago and returned from working at MTV in New York in September, only to find that the job market back home had run out of steam.

When people called her in for a job interview, she said, "The first thing they asked is, What on earth possessed you to come back?" She now plans to head to London to look for work.

"There's a risk," said Colm Donlon, a spokesman for the official Industrial Development Authority, "that highly skilled people will travel across Europe" in quest of jobs.

That itself is a remarkable turnaround from the 1990's, when a heady cocktail of low corporate taxes, European Union aid and a bright young baby-boom work force lured big foreign companies like Intel, I.B.M. and Microsoft just as the global economy blossomed with the high-technology and Internet bubbles.

House prices soared along with that key indicator of boom times — ownership of late-model BMW's. Indeed, the writer Kevin Courtney said in a recent article, the boom produced a legacy of ostentatious young Irish people nicknamed Flash Paddy or Celtic Cubs, whose "stripes are labeled Prada and Armani."

"As W. B. Yeats once wrote: all is changed, changed utterly, a terrible beauty is born," Mr. Courtney recalled. "And there's no beauty more terrible than Flash Paddy."

In the boom years, some 40,000 foreigners from outside the European Union secured work permits each year to fill a shortage of labor. These days the government plans to cut back on work permits to preserve jobs for the Irish.

"No matter what, the economy was going to slow down," said Philip Lane, an economist at Trinity College Dublin. "But the scale of the slowdown is beyond expectations." Not only that, he said, Ireland has become a high-cost country for investors.

Some dispute that. Mr. Donlon, at the Industrial Development Authority, argues that Ireland still has the lowest corporate taxes in Europe — 12.5 percent — and that its economy is doing better than it might have.

Even though inflation is at 5.6 percent and climbing, more than twice the euro zone average, Ireland still hopes to lure investors with grants and tax breaks, he said. The blue-chip American companies, he said, have not abandoned their investments — although two of them, Dell Computer and I.B.M., declined to respond to an inquiry about their long-term plans.

Ireland, moreover, is seeking to create more skilled work for a highly paid work force, moving away from blue-collar assembly-line jobs. And unemployment, at 4.6 percent, is still only half the European average, Mr. Donlon said, just as overall growth — forecast this year at up to 3 percent — is better than most Europeans can manage.

In some ways, though, Ireland's inflation confirms the worst fears of euro-skeptics in Britain (which is still outside the euro zone) — that a universal interest rate among disparate economies will always punish some to the advantage of others.

Right now, for instance, Germany's faltering economy needs low interest rates to spur growth in a nation of some 80 million people. But low interest rates in Ireland encourage consumer spending and inflation. Given Ireland's weight as a nation of 4 million in a currency zone of 280 million, it is hardly surprising that its concerns do not come first.

"There isn't a single rate that's right for all," Mr. Hughes of IIB Bank said. "But that's not unique to the single-currency zone," he said, citing disparate economic conditions in different areas of the United States or Britain.

In this town — once famed as a location for a film version of "Moby Dick" — the big-screen considerations are tinted with a different kind of skepticism, reflecting a sense that too much dependence on outside investors and multinational corporations is a perilous business.

"Eastern Europe at the moment is the cheapest option, and all those countries will come into the European Union," said Liam Ryan, Youghal's town clerk. "The multinationals will get 10 or 12 years there and make their profit and then move on, just like they did here. There's no loyalty in all this."

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