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At the time of the first Lehigh University conference on the Irish economy in 2001, Irish real GDP was still growing at an annual rate of almost 6 per cent, following a decade where growth had averaged over 7 per cent. The 'Celtic Tiger' economy was showing signs of ageing - notably with inflation eroding competitiveness and with it Ireland's attractiveness as a destination for FDI - but there was little sense of the 'bubble economy' that would fundamentally alter Irish economic fortunes over the following decade. The succeeding property-driven economy did sustain high growth for another half decade or so, if not at the spectacular rates of the preceding half decade. But it also sowed the seeds for the financial and economic crisis that has so rocked the economy over the last three years. This paper sets the scene for the papers in the symposium with a review of the property boom, bubble and eventual bust. It also reviews the prospects for crisis resolution and export-driven recovery. [ABSTRACT FROM AUTHOR]

Within EMU, the state of the balance of payments is a crucial signal of possible dangers in an economy. In the case of Ireland, this signal was ignored, and a failure of banking regulation together with wholly inappropriate fiscal policy allowed the current crisis to happen. In the aftermath of the recession, domestic costs have been cut, producing a substantial increase in tradable sector output. This output response will play a crucial role in eventually returning the economy to growth. Tackling the huge government deficit will be necessarily painful and, until completed, will weigh heavily on domestic demand, delaying a full recovery. It will be important that the fiscal adjustment is undertaken in an 'employment-friendly' manner. [ABSTRACT FROM AUTHOR]