The Tiger Is Back

Why Ireland's economy really is on the rebound.

Sean Kay's "The Celtic Cougar" article from Dec. 18 gives a misleading picture of the current condition and future prospects of the Irish economy and of Ireland's inward foreign direct investment (FDI), corporate tax, and indigenous economic development policies in particular.

Latest quarterly national accounts data from the Irish Central Statistics Office (CSO) indicate that Ireland's gross domestic product in the third quarter (Q3) of 2013 grew by 1.5 percent over the previous quarter and 1.7 percent from the third quarter of 2012. As reported by the Wall Street Journal, the Irish economy's expansion over Q3 2013 was by some margin the fastest in the Eurozone and the second-fastest out of all European Union member states.

Irish CSO balance of payments data show that a surplus of €3.4 billion ($4.6 billion) was recorded on the current account in Q3 2013 -- an increase of €1.2 billion ($1.6 billion) on the third quarter in 2012. The Q3 2013 figure corresponded to 8.1 percent of gross domestic product (GDP), a record for Ireland both in absolute terms and as a share of GDP since quarterly records began in 1998.

In the area of corporate taxation, and as we have set out in written correspondence to the U.S. senators mentioned by Kay, Ireland's policies have been declared in full compliance with relevant Organization for Economic Cooperation and Development (OECD) guidelines. And far from being "long criticized in Europe" for our tax policies, the OECD also confirms -- most recently via its Director of the Center for Tax Policy and Administration Pascal Saint-Amans -- that Ireland is not and never has been a tax haven.

In addition, Ireland is fully supportive of international efforts to address aggressive tax planning and we are an active participant, together with the United States, in the OECD project addressing Base Erosion and Profit Shifting (BEPS). To clarify our national position in this regard, the Irish minister for finance published Ireland's International Tax Strategy in October 2013.

Professor Kay is simply inaccurate in his claim that "[foreign] companies don't employ large numbers of Irish people and they put little money back into the Irish economy." As is outlined in the latest available annual report of IDA Ireland -- a government agency responsible for FDI -- 152,785 people were working in 1,033 IDA client companies in 2012; the same year saw the creation of over 12,722 new jobs. In the past couple weeks alone, Charles River Managed Services, Regeneron Pharmaceuticals, and Liberty Mutual Insurance Group have all made further significant job announcements in Ireland. And such expressions of confidence in the Irish economy on the part of major companies should hardly come as a surprise: among other international accolades, Ireland was also recently identified by as No. 1 (first out of 145 countries ranked) on its list of "The Best Countries For Business."

In contrast to Kay's assertion that Ireland's leaders are "understandably hoping for the best, but so far failing to plan for the worst," the decision of the Irish government to exit the European Union/International Monetary Fund Program without a precautionary credit line was taken after the most careful consideration and detailed consultations with our partners in the IMF, the European Commission, European Central Bank, and other European Union Member States.

The context in which that decision was taken was favorable at the time and remains so. Irish bond yields are at historically low levels and Irish public finances are under control. The government is committed to reducing the budget deficit to 4.8 percent of GDP in 2014 and less than 3 percent by 2015, with measures also being taken to ensure reduction over time of our gross debt ratio.

Overseas investors are also rightly comforted by the comprehensive fiscal governance framework now in place in Ireland and Europe, including through the establishment of the European Stability Mechanism (ESM). Klaus Regling, head of the ESM, stated earlier this month that Ireland was right to pursue an exit without a precautionary credit line in place, given the reaction in the financial markets since the announcement by the Irish government in November.

Kay's article correctly underlines the importance of indigenous Irish economic growth. This is an ongoing key priority for the Irish government. Ireland's newly-released Medium Term Economic Strategy 2014-2020 includes specific measures to promote an entrepreneurial culture and encourage indigenous enterprises to grow to scale. Steps to enable better access to capital funding by Irish small- and medium-sized enterprises are a particular focus in this regard.

As the Taoiseach (Irish prime minister), Tánaiste (Irish deputy prime minister), and the minister for finance have made clear, the Irish government is under no illusions: the Irish people have made heavy sacrifices and our country continues to face significant challenges.

Contrary to Sean Kay's claim, the "harsh realities and serious risks to the Irish economy that remain" are not being "swept under the rug." They are being addressed in an urgent and coherent manner that best reflects the overall interests of Ireland and its people.

* * *

Sean Kay responds: I’m very grateful for the comments from Amb. Anderson, and appreciate her desire to put Ireland in the best light possible. There is no question that Ireland has, as noted in the original article, shown improvements in some important areas. The data presented by the ambassador for third quarter economic growth for 2013 was published the day after this piece originally appeared. But it is important to note that one quarter does not represent sufficient data points, and projected growth estimates for 2014 remain low relative to the depths of the economic downturn suffered over recent years of deep recession -- and highly vulnerable to outside demand. 

As the highly regarded Dublin-based economist Constantin Gurdgiev wrote in the Sunday Times on Dec. 8: “[T]he real GDP remained 1.2 percent below the levels attained in Q2 2012. Glass is half-full, says an optimist. Glass is half-empty, per pessimist. In reality, final domestic demand, representing a sum total of personal consumption of goods and services, net government expenditure on current goods and services, and gross fixed capital formation, fell in the first half of 2013 compared to the same period of 2012.”

As to Ireland's corporate tax rates, it is well understood that they have been long criticized by politicians in Europe for the tax rate. As I have also written elsewhere, these same countries also benefit from the introduction of FDI into the Eurozone via Ireland -- thus it is a more complicated issue than many of the critics point to. The reference that the ambassador notes regarding employing large numbers of Irish people was specifically written in relation to the headquarters operations of Facebook and Google -- not to FDI overall. The relative growth of employment from FDI in Ireland has, however, stalled since 2001, which is when the government at the time opted to prioritize the banking and lending sector of the economy. Thankfully, the levels of jobs remained steady during the depths of the recession and that is an important fact that the ambassador rightly points to. Ultimately, Ireland is a great place for outside businesses, but the return into the Irish economy remains insufficient relative to the needs for internal growth and to further reduce unemployment.

The ambassador makes good points relative to the goals of the government for the coming year, absent the precautionary line of credit. These are reasonable goals, but they are planning by assumption and much can change even in six months -- past projections have proven faulty.  It was an understandable statement of confidence to go without it – but the result was to take Europe off the hook for Ireland's continued challenges and remains a risk. Ten-year bond rates are low, however, and many highly regarded Irish economists assume that they cannot naturally stay this low while exiting the bailout. Thus, the question is how high they might go, and what that means also for future rounds of austerity in planning. We will have to see not after one month of reactions but rather six months to a year -- perhaps longer -- whether these assumptions bear fruit.

I appreciate the ambassador making a strong case. We share both a passion and commitment to helping see Ireland move forward. And there is indeed good news, especially in the lower unemployment rate and modest housing recovery. But there do remain rough seas ahead, and the best way to ensure smooth sailing is to identify the obstacles and work to move around them.



Keeping the Blinders Off History

Yad Vashem is not biased against Tunisian Arabs that saved Jews' lives during the Holocaust.

The writing of history is shaped by current events, and historians will always struggle to detach themselves from their views. However, they are expected to follow basic standards of objectivity -- otherwise, history writing becomes subjugated to a political agenda, distortions, and intentional omissions replace the careful exploration of facts. This seems to be the case of Robert Satloff's campaign against Yad Vashem.

In his Foreign Policy article, Satloff claimed that Yad Vashem was biased against recognizing non-Jewish persons from the Arab world as Righteous Among the Nations. The decision to award this title -- a designation bestowed on those who risked their lives to save Jews during the Holocaust -- is made by an independent commission, chaired by a retired justice of Israel's Supreme Court. The Righteous, according to this definition, were people who were prepared, if necessary, to pay a dear price for their stand and even share the victims' fate, though they could easily have avoided it. Each rescue case is thoroughly researched, and the commission considers the documentation gathered and determines if the rescue matched the criteria necessary for recognition.

The fact is, however, that not every story meets the criteria for recognition as Righteous Among the Nations. This was the case for the Tunisian examples cited by Satloff.

One case involved Tunisian farm owner Khalid Abdul Wahab, who hosted the Boukhris and Ouzzan families on his estate during the German occupation. Annie Boukhris described the kindness and protectiveness of Abdul Wahab, who offered her family refuge after their house in the coastal city of Mahdia had been billeted by the Germans. In a video testimony, Edmee Masliah, the second witness, spoke to Satloff and vividly described Abdul Wahab as a noble and generous person who supported her family at a time when they had been stripped of their rights and property.

Regretfully, Satloff chose to ignore the part of Masliah's story that clearly showed Abdul Wahab took no risks and broke no law by hosting the Jewish families. She explained that the Germans would come from time to time to Abdul Wahab's estate and check if they were all present. She described how, when seeing the Germans approach, they would put on their yellow badges and wait for the Germans to count them. According to Boukhris, the men of the family continued their forced labor service under German supervision and would come and go as ordered. On Thursdays, to prepare for Shabbat, the family would join the other Jews of Mahdia on a Jewish-owned farm in Sidi Alouan, not far from the Abdul Wahab estate.

Consequently the commission concluded that hosting the Jewish families posed no threat for Abdul Wahab, and therefore decided that the case did not fall within the framework of the Righteous program. The reason was not the short period of the German occupation -- a fact Satloff is well aware of, because it was communicated to him on several occasions. However, in order to make his case, Satloff preferred to take a general comment by the Yad Vashem chairman about the historical background in North Africa and leave out the historical specifics.

The other case raised by Satloff is that of Hamza Abdul Jalil, who ran a bathhouse in Tunis and allegedly provided refuge to Joseph Naccache, a Tunisian Jew. Unfortunately, a careful examination of the case raises many contradictions and open questions about Naccache's testimony. 

While he was shooting his film "Among the Righteous," Satloff interviewed the 88-year-old Joseph Naccache, a frail and ailing old man. The survivor mentions Abdul Jalil only fleetingly, and his comments are often fragmentary. When asked what happened when they saw the Germans, Naccache says: "We escaped when we saw them. We escaped. We went up the stairs and went to Abdul Jalil."

Yet, in his film, Satloff enters the bathhouse from the street, clearly on the ground floor. His camera zooms into a small space, which he declares was probably Naccache's hiding place (in his Foreign Policy article, the place is defined as "the bowels of his bathhouse"). It doesn't make any sense that Naccache would escape "up the stairs" if he was hiding on the ground floor of the building.

Naccache's brief comment was insufficient to establish the circumstances of his stay with Abdul Jalil. Yad Vashem therefore contacted his daughter and half-brother, who said that Naccache spent time in his aunt's house, with his own parents, and briefly with Jalil. Since Naccache also said that he was taken to forced labor camps, it is not clear when these events took place, and unfortunately, in the absence of witnesses, it is impossible to reliably reconstruct the circumstances.

Thus, Abdul Jalil has not been honored as a Righteous -- not because Yad Vashem rejects Arabs outright, but because there is insufficient evidence of what actually occurred.

Like Satloff, we remain ever hopeful that the accounts of these brave men and women who assisted Jews -- wherever they lived and however they extended their help -- will continue to inspire future generations. But it will only be historical fact that determines who is designated as one of the Righteous Among the Nations.