Ireland - A European Role Model ? World Political and Economic Geography Metropolitan University Prague Martin Kolmhofer, Ph.D.

1. Helped by a low corporate-tax rate of 12.5%, Ireland attracts foreign direct investment (FDI),
especially from American firms and particularly in pharmaceuticals, information technology and
financial services.

2. The double Irish arrangement is a tax avoidance strategy that U.S. based multinational
corporations use to lower their corporate tax liability. The strategy uses payments between related entities
in a corporate structure to shift income from a higher-tax country to a lower-tax country. It relies on the
fact that Irish tax law does not include U.S. transfer pricing rules. Specifically, Ireland uses territorial
taxation, and hence does not levy taxes on income booked at subsidiaries of Irish companies that are
outside of the state.

3. Ireland’s success in attracting foreign investment has its drawbacks. Ireland’s reliance on foreign
firms gears the Irish economy to global growth so that it suffers when world trade falters. It also
makes the economy vulnerable to shocks affecting specific sectors (Pharmaceuticals).

4. Banking sector (Bank Assets as percentage of GDP) is oversized. Household debt before the financial
crisis amounted to 190 % of GDP. This, in turn, led to a massive increase in the price of Irish property
assets.

5. The 2008–13 Irish banking crisis led to a number of financial institutions requiring government
assistance. Anglo Irish Bank was nationalised on January 20, 2009 when the Irish government
determined that recapitalisation would not be enough to save the bank.

6. 2010: IMF and EU bailed out Ireland amid fears of Eurozone contagion. Ireland became the second
euro zone country to seek an EU-IMF bailout.

7. PIIGS: An acronym used to refer to the five eurozone nations, which were considered weaker
economically following the financial crisis: Portugal, Italy, Ireland, Greece and Spain. Since the
nations use the euro as their currency, they were unable to employ independent monetary policy
in order to help battle the economic downturn.

8. The Fiscal Compact is an intergovernmental treaty introduced as a new stricter version of the
previous Stability and Growth Pact, signed on 2 March 2012 by all member states of the European
Union (EU), except the Czech Republic and the United Kingdom. The treaty entered into force on 1
January 2013.

10. HISTORY OF POLITICAL AND ECONOMIC THOUGHT

11. FINANCIAL MARKETS: THE CITY OF LONDON

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