Celtic Tiger still has a spring in its step despite hibernation

National wealth is not the same as national income

National wealth is not the same as national income. Most international country comparisons are based on figures for national income in a given year.

They could give the impression, for example, that the effect of eight years of unprecedented growth from 1994 to 2001 has been to make Ireland a wealthier country than most of its EU partners, including, for example, Britain and Germany.

But real wealth is the product of accumulated high income over several decades, or centuries, converted substantially into long-term assets.

The German autobahn system, French or Austrian public transport, the well-endowed colleges in Oxford and Cambridge or the treasures of Europe's most famous museums will not be adequately reflected in any national income tables.

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It is important that in Ireland we fully understand that only stable and sustained growth over a prolonged period will allow us to build up modern real wealth in the depth and breadth that we aspire to.

Equally, people in longer-established strong economies like Germany, which are currently stagnant, may become overly depressed by numbers indicating they are slipping down the league tables.

I was in Cologne last weekend with my wife as guests of the Ireland Fund of Germany. The energetic chairwoman is Brigitte Wagner-Halswick, owner of a family pharmaceutical company, which employs 140 people in Bantry. Denis O'Donovan, TD from Cork South West, was also present.

There is a sense that decisive economic reform is needed in Germany.

Whether it will be carried out by the government of the Chancellor, Gerhard Schröder, or by a CDU-led coalition under Angela Merkel as Germany's first woman chancellor, who still faces formidable rival barons (male), remains unclear.

Elections are due in 2006. Qualitatively, it feels like the situation of Ireland in the mid-1980s. I have little doubt that Germany will regroup and bounce back, once confidence in decisive and effective government action is restored.

A couple of articles are indicative of the current mood. Die Welt on March 20th, quoting the president of the German External Trade Association, carried a headline, "Full employment is possible in eight years' time".

An article in Spiegel has tables showing a German debt-GDP ratio of 64 per cent, an unemployment rate of 11.6 per cent and a rise in the share of social contributions from 35 per cent of gross pay in 1991 to 42 per cent in 2003.

It asserts that the land of the economic miracle is no longer in the top league, and that Modell Deutschland (the election slogan of the former chancellor, Helmut Schmidt) has ceased to function.

The article contains a swipe at Ireland: "In Ireland, which, thanks to its tax policy, attracts from around the world entrepreneurs willing to relocate abroad, jobs in industry increased during the period 1995 to 1999 by 25 per cent" (Germany, minus 5 per cent).

When the European economy, and particularly the German one, does recover, there will be a heightened risk that the euro will strengthen against the dollar and sterling. We need to maintain a tight ship, if we are to stay competitive in that situation.

While it is reasonable that income growth in new partnership negotiations should take account of improvements in productivity, the figure must not give new impetus to inflation, only recently brought back down below 2 per cent.

Cities defined by internationally recognised landmarks have a potential advantage. In Cologne it is the twin spires of the cathedral beside the massive Hohenzollern Bridge over the Rhine (so called after the flanking equestrian statues of Germany's three Kaisers 1871-1918).

In the Museum Ludwig there is currently an exhibition of the work of a group of avant-garde painters, Russian and German, who worked together pre-1914.

The collection comes from the Lenbachhaus in Munich. The group was called Der blaue Reiter, after a striking depiction of a blue-coloured horse against a background of rounded hilltops.

To my delight I found a companion piece, The Tiger (1912) (see opposite), which I reimagined as a visual symbol of the Celtic Tiger. As our guide, assistant museum director Dr Litz, commented, the tiger is "well embedded in the landscape".

A young person's guidebook by Doris Kutschbach is even more fitting: "Here the gaze of a chewing tiger meets us. All the forms are angular. We sense the power and the energy of the strong animal and know at any minute he will spring up".

If the Celtic Tiger has been recumbent, the economic spring is still there.

The committee stage of the Finance Bill in the Seanad this week has again been an occasion when the Minister for Finance, Charlie McCreevy, has been at his most expansive. He is now the longest-serving finance minister since the 1930s.

There was general acknowledgment that Ireland had come through the last two years in unexpectedly good shape. The Minister was adamant that various construction-based incentives, e.g. urban renewal and seaside resorts, would come to an end in 2006.

Of the stallion fee exemption, he said: "We have done better than any other country and are a world leader in the area of horse-breeding. We should think long and hard before making any change in that area."

(The general view in the Seanad in the previous Social Welfare Bill debate, notwithstanding a division, was that the latter principle should also apply to support for widows).

He emphasised the many forms of support the Government gives the GAA, when rejecting the idea of a special tax credit not related to income from sport.

We have to watch closely what neighbouring jurisdictions do. The British Chancellor of the Exchequer, Gordon Brown, intends to major on R & D, where we also have taken positive initiatives. He has followed us on decentralisation, but plans to implement it much more ruthlessly, with no restraining social partnership.

Revenue buoyancy in this country is not just due to economic growth, but more vigorous enforcement. A new culture of full tax compliance will be the best diet for the Celtic Tiger, when it springs up again.