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Once a medical device mecca, Ireland is now an economic disaster

During Tuesday’s conference call with analysts, Medtronic Inc. CEO Bill Hawkins extolled the company’s operations in China: $500 million in annualized sales, 20 percent yearly growth rate, a state-of-the-art patient center in Beijing and a shiny new headquarters in Shanghai.

It wasn’t so long ago that medical device firms spoke in equally glowing terms about Ireland. The country was a beacon of high tech economic growth, Europe’s version of Silicon Valley.

Thanks to low taxes and a highly skilled workforce, Ireland attracted manufacturing and research and development operations from big medical device makers like Medtronic, based in Fridley, and Boston Scientific Corp., based in Natick, Mass., with major operations in Arden Hills.

Today, Ireland’s economy lies in ruins, a victim of shaky banks and severe recession. Earlier this week, after much reluctance, the Irish government officially applied for a bailout from the European Union worth over $100 billion.

Obviously, no country wants an economic bailout because there is no such thing as a free lunch. A rescue package likely means conditions the recipient isn’t going to like. And in Ireland’s case, that could mean the end of its beloved 12.5 percent corporate tax rate, the lowest in the EU and the reason why foreign companies flocked to the country in the first place.

Ireland Wednesday unveiled its budget plan, which raises personal income taxes and cuts spending, but leaves its corporate income tax in place. However, such an austerity program could depress consumer demand and worsen the unemployment rate.

But like fellow EU member Greece, Ireland lacks money to run its government and may need to raise taxes.

Ireland’s other attractive asset, its educated and highly skilled workforce, is disappearing. A poor economy has forced its people to seek jobs abroad. Experts say about 65,000 people left Ireland last year, and some estimate that the number may be more like 120,000 this year.

To be sure, medical devices remain a crucial component to Ireland’s economy. The country boasts the highest per capita employment of medical technology workers in Europe, with more than 25,000 employed in the industry. Medical devices exports totaled $8 billion last year.

Medical device makers are unlikely to leave anytime soon. Medtronic spokesman Brian Henry said Ireland’s bailout woes has not impacted its operations.

But how long can that possibly last? With its economy in tatters and skilled workforce in jeopardy, Ireland, to put it kindly, is no longer the medical device mecca it used to be.

After all, a country that applies for a $100 billion bailout doesn’t exactly inspire confidence in foreign investors.

Comments (4)

  1. Submitted by Bill Gleason on 11/24/2010 - 10:51 am.

    A good article, Thomas.

    Could you please attempt to answer the question:

    Were the tax breaks offered by Ireland ultimately the reason for the economic collapse? I am not equipped to answer this question but respect your judgement.

    In Minnesota right now, as you know and have written about, we have to make some serious decisions about how to grow jobs.

    There seem to be – simplistically – two options. The GOP insists – and perhaps they are right? – that cutting business taxes is the answer. I admit to being skeptical, since without positive incentives for investment other economic incentives, it seems unlikely that the money business saves by tax cuts will be invested. I would call some combination of limited tax cuts and economic incentives the second option.

    Your thoughts? Perhaps this is not the forum, since you are a professional business writer. But I hope that at some time you will address this issue in your writings.

    Keep up the good work. You have a good sceptical eye as well as an obvious interest in what is good for business and jobs in Minnesota.

    Bill Gleason

  2. Submitted by Thomas Lee on 11/24/2010 - 12:55 pm.

    Bill, read my story on Friday.

  3. Submitted by Bernice Vetsch on 11/26/2010 - 10:20 am.

    I’d love to see Ireland be the country to prove that draconian cuts to public services and the common good are NOT the way to solve problems caused by, but not borne by, one industry – the financial one.

    Let the banks and their investors take responsibility for their greed instead of the working and middle classes of Ireland. Let their investors rise up in rage and fire entire boards of directors. To me, this would be a fine incentive for banks to avoid slippery practices in future in order to stay in business.

    Ireland could no doubt purchase the failed banks at low prices and temporarily manage them until their shareholders have chosen new, honest management.

  4. Submitted by Richard Schulze on 11/28/2010 - 09:14 am.

    The bust came from the property sector because of the too-low interest rates which were imposed by currency union because the German economy was too weak. It was private borrowing that broke the economy, not public profligacy. And who are the ultimate creditors – German and French banks to a large extent. Of course the financial crisis is a global matter, but few countries will experience the dept and scale of the crisis in Ireland.

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