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Dublin: 5 °C Monday 24 February, 2020
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Column: State visits won't spark an economic turnaround

Former trader Nick Leeson argues that, despite the hype, the visits of Queen Elizabeth II and President Barack Obama will not be the catalyst for a major change in Ireland’s financial fortunes.

Nick Leeson

LAST WEEK SIGNALLED the first visit by an English monarch to these shores in 90 years of independence.

It was a fantastic occasion, passed off with little or no real incident and should result in a strengthening of the relationship between the two countries. The symbolic nature of the visit was immense and a delight to behold.

Yesterday morning, the President of the United States Barack Obama landed at Dublin Airport to begin his State visit. A large media entourage followed his every movement and Ireland hit the pages of newspapers around the globe for the second consecutive week.

Showcasing Ireland in this manner is fantastic and the opportunity was one that would have been difficult to miss out on. The Dublin Chamber of Commerce announced that over 5,000 articles were published across 95 countries within 24 hours of the Queen’s first step into the country. There is no doubt that this at least doubled by the end of the week. Added to the television coverage one industry expert suggested that the “global publicity for the visits of H.M. Queen Elizabeth II and the President of the United States of America, could be worth as much as €150 million in advertising terms for Ireland”.

But what real value do these visits bring to the country? They may possibly repair some of the negative stories that have dominated the financial landscape since the original bank guarantee was given in September 2008. They may possibly give tourism a boost in a country where it has to be said it has been waning for a number of years. If either does happen, unfortunately it will be very short-lived.

I was amazed by some of the headlines during the last week. Many suggested that the Queen’s visit had sparked an economic turnaround and that it was the catalyst for a major change in fortunes. The truth unfortunately is something very different: this is nothing more than a minor distraction from the economic difficulties that we are experiencing.

Europe and the IMF are loaning Ireland a total of €67.5 billion to prop up its banks and cover its sovereign funding needs after revelations of huge property-related loan losses. As a consequence Ireland has no real access to debt markets that the majority of other countries enjoy. Problems in Greece are keeping Irish borrowing costs at euro-era highs. Apart from engaging two State visits that will have cost an estimated €30-40 million by conclusion, the Government are doing all that they can to get ahead of the problem but there are serious doubts that it will be enough.

“A massive increase in tourism is not on the cards.”

Ireland’s medium term growth prospects are key for its ability to shoulder its debt burden. Ireland’s economic recovery will be largely export dependent and this following a severe recession is subject to considerable risk.

A massive increase in tourism is not on the cards. Ireland is suffering from the double whammy of an economic bailout and a strong currency. The euro remains at very strong levels against the Pound and the US dollar. Great if any of us are visiting those shores but not so good if we are looking for tourists to visit Ireland. The strength of the euro is also damaging the export generated growth that everyone is looking for, making Irish products more expensive in comparative terms.

I spend two days a week in London at the moment. Fly Shannon to London Stansted on Ryanair for less than the cost of a train ticket from Galway to Dublin and always return shocked by the comparative cost of living in Ireland.

Michael O’Leary is not expecting a massive influx of tourists into Ireland. Ryanair Holding PLC announced yesterday morning that it would cut capacity for the first time in its history next winter as higher fuel costs threaten to render much of the network unprofitable. CEO Michael O’Leary announced that he would ground 80 of 300 jets for the low season starting in October.

“It’s the first time ever that we’ll go negative on traffic,” O’Leary said.

One of Ireland’s greatest business successes, Ryanair, fell as much as 9.2 per cent in early morning trading yesterday to €3.25 and continues to trade around this level.

The optimism surrounding the recent visits is a welcome distraction to many and economic growth in Moneygall this week is guaranteed. But when the dust settles next week, the costs will have been tallied and Ireland will remain an expensive country to visit, negating the positive impact of these visits. The cost of travel, recreation and dining out remains excessive in euro terms in relation to both the UK and the USA.

Unless this changes, we will very quickly be back to the hard options to see us through the economic quagmire.

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