A country suffering the biggest economic contraction in all of western Europe. A country that needs to borrow one euro for every two it spends, a country with the second highest unemployment rate in the entire eurozone, a country with the most expensive borrowing costs of any current bond issuer in the eurozone.
Ireland ticks every one of the wretched boxes above. This country would also be ticking the box marked 'highest eurozone unemployment rate' only for embattled Spain, which has a catastrophic rate of 18%. This country would also have the worst budget deficit of any western European economy, except that Britain has managed to saddle itself with a 12% budget deficit thanks to chancellor Alistair Darling. Only for the euro itself, some believe Ireland would be ticking the most blood-curdling of all boxes, the one marked 'sovereign debt crisis'.
The battery of economic statistics above makes it almost impossible for the government to persuade reluctant consumers to switch from rampant, fear-based saving, to relaxed, future-oriented spending. But the Minister for Finance Brian Lenihan is trying to place some smelling salts under the noses of shell-shocked Irish consumers with his recent press statements.
Whatever about the content of these statements, the motivation – to halt the precautionary savings tide – is an admirable one. Excessive saving (if you believe that's what happening here) can deepen economic slumps considerably, according to economist du jour, John Maynard Keynes. Ireland's consumers clearly need to repair their household balance sheets, but do even the most securely employed need to shovel almost a fifth of their disposable income into low-yielding deposit accounts?
The savings rate hasn't hit those levels yet, but if economic fear continues to stalk the land, it could reach those kind of levels. The government appears to be trying to prevent this and last week the Department of Finance talked of stabilising the public finances and consequently enabling consumers to "invest and spend with a greater degree of confidence about future Irish prospects".
Fear of job loss stymies spending
This is at least what Brian Lenihan was saying in the middle of the week, although his attempts to 'sound' more confident were slightly undone by Friday's live register figures, which showed unemployment hovering around the alarming 400,000 level.
Keynes was fond of saying that little old ladies with their savings books are what kills economies during downturns. But to get the little old ladies to set aside their deposit books is going to be difficult unless consumers feel, see and perceive there are some green shoots out there. But are there?
The answer, at least for Ireland, is no. Yes the rate of economic decline is slowing and upon those foundations a recovery might come. But there is nothing tangible out there yet that suggests the pain for ordinary taxpayers is over. The reason this group is worth mentioning is because a lot of the frothy talk out there about 'recoveries' and yes those hackneyed 'green shoots' concerns improvements in perceptions of Ireland's credit worthiness internationally.
All well and good, but nobody sits around the public houses of Ireland toasting the latest narrowing of our sovereign bond spreads. A recovery, as defined by most taxpayers, has to be broad-based in nature and involve an increase in economic output that leads to a reduction in the level of unemployment.
While unemployment is always a lagging indicator, it is a very powerful force in terms of its impact on other indictors, such as consumer spending, taxation revenues and, of course, property values.
For example, the car industry is likely to remain in the mire until there is some sign that job-shedding is slowing to a halt.
Anecdotally, fear of job-loss is a top three reason consumers give for not renewing their car. The connection between job insecurity and falling car sales is one made by the industry itself worldwide. For example, Hyundai in the US is promising consumers who buy one of its cars that the company will buy it back if the buyer loses his or her job.
When it comes to recoveries, jobs, jobs and jobs is the issue. A quick glance through the jobless numbers tells you why there are certain pockets of the country enduring an economic tsunami. Take Dublin – there are 9,252 people signing on in Clondalkin social welfare office, 8,787 signing on in Tallaght, 8,116 signing on in Blanchardstown.
Outside Dublin, other black spots are obvious, with 16,046 signing on in Kildare, 16,009 signing on in Wexford and 5,119 signing on in Kilkenny. Newbridge, right in the middle of the Dublin commuter belt, has 8,553 signing on.
Higher tax impedes confidence
Talk of recoveries here are not likely to be welcomed. Even when a national economic recovery comes, local conditions and rigidities are likely to stymie the best efforts in some of these areas.
But are the unemployment figures at least moving in the right direction? Yes there is a slowing in the rate of decline. The government can justifiably make a case on those narrow grounds. For example, seasonally-adjusted unemployment rose by 33,000 in January, but the increase slowed to 26,700 in February, to 20,000 in March and 15,800 in April.
But it's worth remembering that as recently as April 2008 the country was operating with a seasonally-adjusted unemployment rate of 5.2%. The speed of deterioration in the labour market has been remarkable and represents one of the fastest deteriorations ever recorded in any European economy.
But more frightening than that is the toll the figures are taking on the young, with Ireland now experiencing a youth (under 25) unemployment level of 24%, with a very large male skew to the figures. In April of last year, only 11% of the young were out of a job, at least according to the live register.
This huge level of unemployment among the young is going to remain a drag on the government's attempts to spur a recovery in consumer spending and economic activity. The higher rate of tax now paid by those in work is also a significant impediment to restoring consumer confidence. Irish taxpayers are now paying a marginal tax rate of over 50% when the long list of budget levies are included.
Consumer spending is crucial because the government has in some respects swapped its dependence on boom time property taxes for a dependence on Vat receipts. Leaving aside reductions in spending and hikes in income taxes, this government is going to balance its books by riding a wave of Vat receipts.
But that is where the government remains vulnerable and talk of green shoots needs to be shelved for now. The government's target for Vat receipts to the end of May was €5.5bn, but it failed to hit that number and dropped short by 3.7%. This is not fatal to its overall plans, but repeated for the remainder of the year and it could be a problem.
So far, other tax heads (corporation tax, income tax, excise) are helping to mop up the Vat shortfall but that may not continue for the rest of the year. The problem is that once the summer ends, consumers are facing into the next budgetary cycle and December's production is really going to hurt, with talk of a property tax forcing consumers to once again put away their wallets.
More shrinkage next year
Media speculation about the nature, scale and implementation of a property tax has already started and this is likely to be a drag on consumer sentiment later this year, when the precise details start to leak out. A carbon tax is also planned and this is going to force large-scale companies to start making provision for the cost, further dampening down investment levels.
Despite the poor mood music later this year, Davy Stockbroker's chief economist Rossa White remains confident the government can still limp over the line and hit its target of a 10.75% deficit in 2009, although he concedes they may marginally exceed this.
To exceed it by anything more than one or two percentage points could unnerve the bond markets, which have so far stayed faithful to the Irish government.
The government can rightfully suggest that if it hits the deficit target, gets the December budget through the Dáil, the long, painful road to public financial recovery is underway. But even that will simply be a public finance recovery. It will not be actual growth in the economy.
Ask outside analysts and they remain very sceptical of the Irish economy's prospects, even in 2010. For example, Oxford Economic Forecasting is pencilling in more shrinkage next year, amounting to about 0.6% in terms of real GDP. Economies in the OECD on average will be growing by 1.2%, with the US economy reaching the heady heights of 1.6%.
Against the bleak backdrop of 2010, it's no wonder that consumer sentiment in Ireland is not improving, even though it has started to turn in the US. Job concerns, falling wages and impending tax rises are not what recoveries are made of.
The best that can be said about the future is things will be less bad
* The rate of unemployment is slowing down from catastrophic levels experienced in January.
* Ireland has collected almost 40% of the tax revenues it needs to pull in for this year.
* The year-on-year decline in tax revenues has slowed from 24% to 21%
* There is no sign of Ireland having a sovereign debt crisis, à la Iceland or Latvia
* The KBC /ESRI consumer sentiment index has declined from 46.8 in April to 45.5 in May, a 6.76% fall from last year
* Unemployment is continuing its remorseless move upward, with no sign of it peaking
* The liabilities of the Irish state to the banks remain unknown. The method of funding Anglo Irish Bank has not been disclosed
* Ireland's creditworthiness remains poor and funding pressures could still emerge if the bond market loses confidence in government actions
Unemployment: A Growing Problem
January 2008 4.8%
January 2009 9.6%
Seasonally adjusted/CSO figures