Having been Managing Partner of Grant Thornton Ireland for 9 years, I was naturally drawn to the mixed views of Irish businesses in our 2013 Future of Europe report which we released this week. The report revealed much support for what the euro has achieved, but very little appetite for further integration. What’s going on here?
First the numbers. 88% of Irish business leaders describe their country’s membership of the euro as positive, the highest in the eurozone, and up from 70% this time last year. Further, 98% want to see the single currency survive, again the highest in the currency area. All positive so far.
However, 68% of Irish businesses do not want to see any other economies adopt the euro in the near future, well above the eurozone average (39%). Moreover, 30% do not want to see any further integration – political or economic – between European nations. Of all EU nations only Sweden and the UK are more integration-averse.
In other words, Irish business leaders are nervous that bringing other countries into the Euro will further destabilise the currency. It is becoming increasingly difficult to achieve alignment in European economies and Irish businesses want to see consolidation and the stability before further changes are considered.
The Q1 IBR confidence indicators back this up. Net 50% of Irish businesses are optimistic for their economy over the next 12 months, up from -13% a year ago. A further 46% expect to increase revenues, up from 28% this time last year. Comparing this with southern Europe (Greece, Italy, Spain) makes interesting reading: businesses there are overwhelmingly pessimistic about the economic outlook (-27%) and just 18% expect to see revenues rise.
We reported last year that all these economies have had to go through painful internal devaluations, but it is Ireland which is looking best placed for growth. Expansion of 0.5% this year is forecast to be followed by 1.4% next. Not rapid by any means but better than southern European economies which are expected to contract across the board this year.
High residential property mortgage arrears remain a challenge to the banking system but the seven-year maturity extension to bailout loans is welcome and Ireland looks set to exit its adjustment programme later this year.
It should also be able to shake off the loathed PIGS acronym in the process.