The “Celtic Tiger” roared during the 1990s. The dot.com bubble, low taxation, and corporate-friendly legislation produced a boom economy in Ireland that lasted for a number of years. Recently, however, the growth has slowed, and the Celtic Tiger seems to have grown weary. While the economy continues to grow at a rate above the EU average, Ireland has not fiscally adjusted itself to the fact that the boom times are over.

The “Emerald Isle” still enjoys one of the strongest economies in Europe. In 2003, Ireland’s real growth of gross domestic product (GDP) was 2.1 percent, triple the average of 0.7 percent. Although the economies of Germany and France are far larger, Ireland’s real growth skyrocketed above theirs as well, at -0.1 percent and 0.1 percent, respectively. If Ireland is able to sustain this rate of growth counter to the trends in the global marketplace, it is likely that its economy has the capability to remain strong in the long term as well.

Unfortunately, not all the economic statistics are good. In the heyday of the Celtic Tiger, the Irish economy was flying along at the robust growth rate of 8 percent; this has now fallen by three-quarters. However, the real problem lies in the absence of any response by Ireland to the fact that times have changed. The EU Harmonised Indices of Consumer Prices show that Ireland has the second highest cost of living in the European Union. During the days of the Celtic Tiger, the response of employers to increases in the cost of living in Ireland was to increase employees’ wages. This knee-jerk reaction was sustained for as long as the boom times rolled. In most of Europe and in the United States, this abruptly ended with the collapse of the dot.com bubble. In Ireland, the end to this one-upping has been very slow in coming.

The obvious result of this constant increase in both wages and costs is a higher rate of inflation. This problem is likely to become more acute with time since certain commodities, such as oil, are available to the Irish economy solely through importation. Since crude oil prices are projected to continue to increase, the cost of oil in Ireland can only be expected to follow suit and rise well above its current rate of $4.75 per gallon (1 per liter). If other forms of energy continue along a similar path, an entire sector within the Irish economy will see a rapid rise in cost. The centrality of energy to all parts of the economy will produce a categorical rise in prices and thus a substantial rise in the cost of living in Ireland. It seems that a very high rate of inflation is imminent.

And if there is something that can render the former Celtic Tiger a feeble feline, it is inflation. Once inflation reaches a critical level, certain goods, like energy, will reach prices that cannot be supported by the average worker. At this point, there are two possible results: either businesses will contract in order to be able to pay some employees sufficient wages, or employees will continue to work knowing that they are unable to earn enough money for basic necessities. Not only then will inflation cripple the Irish economy as businesses become unable to expand and per capita purchasing power decreases, but will also create tremendous instability within the European Union. The economic system that the euro has created is relatively untested; how it would respond to one member state with an enormous rate of inflation is uncertain and ultimately unforeseeable. But it is certain and what is knowable is that it would create fear within the markets and, with fear comes instability.

In short, the point is that the Irish economy is doing well—a strong rate of growth and a low unemployment rate attest to this—but there can be too much of a good thing. An economic boom cannot last forever, although it is certainly understandable why a country like Ireland, long overdue for one, would want to see it go on for as long as possible. Ireland may have achieved prosperity sustainable in the long run. Yet if Ireland does not take the necessary steps to change the boom mentality in the country, not only will the Celtic Tiger fall into an unending slumber, but with it might go the stability of the European Union.