Here is an article from the New York Times that I found depressing but informative. Ireland's economy in the mid-2000s, despite its embrace of technology firms and their skilled, high paying jobs in the 90s, became driven by real estate development and a housing bubble. When the housing market collapsed and the credit crisis started, Ireland was rocked by recession. In response Ireland instituted wage cuts and tax increases without any stimulus spending. Its economy is still in the tank nearly three years on, with unemployment at 13% and growth not expected to return until 2012. Here is a passage from the article:
Rather than being rewarded for its actions (spending cuts and tax increases), though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Joblessness in this country of 4.5 million is above 13 percent, and the ranks of the long-term unemployed — those out of work for a year or more — have more than doubled, to 5.3 percent.
Now, the Irish are being warned of more pain to come.
Policy makers around the globe should view the Irish experience as a warning. National debts are not good, but sometimes the alternatives are worse. The article ends predicting that Ireland's government will likely get voted out of office in 2012.