Published on : Sunday, October 13, 2013
Ireland – Reducing sales tax for Irish hotels, restaurants and other tourist businesses has paid dividends, a fact the country’s finance minister was reminded of upon checking into his hotel room for a party conference last month.The initiative created over 15,000 jobs in two years and helped visitors to Ireland rise by over six per cent this year, the minister and other members of his Fine Gael party were told in carefully-placed pamphlets by the Irish Hoteliers Federation.
But with a seventh round of austerity in five years on the way in next week’s budget, Michael Noonan is not sure he can find the cash for an extension.In the popular tourist county of Wicklow, restaurateurs say he risks undermining one of the few economic bright spots.
Though not as a big a contributor to the economy as it is in Spain or Greece, tourism is more
employment-intensive than the robust export sector. Hotels and restaurants employ almost as many people as the nearly one in ten who work for foreign firms like Google, Apple and Pfizer.
It has also been given a kickstart by a year-long government campaign to lure visitors with Irish roots. The Gathering’ has seen North American tourists rise by a massive 16.5 per cent.The government is banking on a resumption of strong export growth next year to return economic growth to the 2 per cent seen in 2011.
Analysts say it will be the performance of trade partners – not the country’s restaurants and hotels – that will determine how smooth a bailout exit Ireland makes.
“If someone waved a magic wand and made me finance minister in the morning, I’m not sure how I’d deal with it myself because it’s an exceptionally tough call,” said Eoin Fahey, chief economist with Kleinwort Benson Investors.
”But right now I wouldn’t say that I would cut my forecasts because I and other forecasters have the VAT hike built in and the number of jobs that have been created, while substantial, are probably not enough to However if euro zone recovery does not arrive as fast or as solidly as Ireland needs, the domestic economy will have to pick up the slack at a time when Ireland needs growth of between 2 and 3 percent to put its debt on a sustainable path.