Identifier
Created
Classification
Origin
04DUBLIN1672
2004-11-09 15:48:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Dublin
Cable title:  

SCENESETTER FOR TREASURY SECRETARY SNOW'S NOVEMBER

Tags:  OVIP ECON PREL ETRD EINV PGOV EU 
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UNCLAS SECTION 01 OF 02 DUBLIN 001672 

SIPDIS

SENSITIVE

TREASURY FOR CURRY, MEYER, GREWE
FOR SECRETARY SNOW FROM AMBASSADOR KENNY

E.O. 12958: N/A
TAGS: OVIP ECON PREL ETRD EINV PGOV EU
SUBJECT: SCENESETTER FOR TREASURY SECRETARY SNOW'S NOVEMBER
14-15 VISIT TO IRELAND


UNCLAS SECTION 01 OF 02 DUBLIN 001672

SIPDIS

SENSITIVE

TREASURY FOR CURRY, MEYER, GREWE
FOR SECRETARY SNOW FROM AMBASSADOR KENNY

E.O. 12958: N/A
TAGS: OVIP ECON PREL ETRD EINV PGOV EU
SUBJECT: SCENESETTER FOR TREASURY SECRETARY SNOW'S NOVEMBER
14-15 VISIT TO IRELAND



1. (SBU) Summary: The Irish Government and Embassy Dublin
warmly welcome your upcoming visit to Dublin. Past and
present Irish policy-makers look forward to substantive
discussion with you on the dramatic transformation of
Ireland's economy. I am planning a dinner in your honor that
will include EU Commissioner-designate and former Irish
Finance Minister Charlie McCreevy. You will also meet with
Prime Minister Bertie Ahern, Finance Minister Brian Cowen,
and other "architects" of the Celtic Tiger economy. Besides
explaining Ireland's economic achievements, these leaders
will likely question you about the recent U.S. elections,
particularly the implications for Europe. Ireland sees
itself as a bridge between "Boston and Berlin," and your
interlocutors will seek the second Bush Administration's
views on strengthening the trans-Atlantic relationship. End
summary.

--------------
Ireland -- A Confident EU Member State
--------------


2. (SBU) Ireland's economic and diplomatic successes have
boosted the country's standing in the EU and have given Irish
citizens unprecedented national confidence. In less than a
generation, Ireland has grown from one of the poorest EU
Member States to one of the richest (in GDP per capita),
largely on the strength of government policies that espoused
open trade and investment, low corporate taxes, good labor
relations, low government debt, and prudent use of EU support
funds. Although the Celtic Tiger stumbled somewhat with the
post-9/11 global slowdown, a surge in housing construction
has Ireland on track to achieve roughly 5% annual GDP growth
in 2004, the highest in the EU. Moreover, Ireland won high
marks in Europe for its recent EU presidency, which saw the
accession of ten new EU member states, the successful
negotiation of the EU Constitutional Treaty, and the launch
of the U.S.-EU Trans-Atlantic Economic Partnership. These
accomplishments have contributed to Ireland,s self-image as
an effective broker within the EU and a role model for new EU

Member States.

--------------
Links with the U.S.
--------------


3. (SBU) While Ireland is a player in the EU and continues
to benefit from EU markets and support funds, Irish leaders
attach equal importance to relations with the United States.
Beyond long-standing cultural ties, U.S. trade and investment
have been the twin engines of the Celtic Tiger economy, as
you will likely hear in your discussion with the American
Chamber of Commerce. There are roughly 570 U.S. firms
operating in Ireland, employing over 90,000 people and
accounting for a third of Ireland,s annual exports. These
firms include most major biotechnology, IT, and financial
services companies, which use Ireland as a gateway to EU
markets. Last year, new U.S. investment in Ireland reached
$9 billion, compared with $3.8 billion in China. The central
role that U.S. businesses have played in Ireland's economic
transformation, however, is a story not often told by the
Irish media, which tend to take a negative view of the United
States, particularly our efforts in Iraq.

--------------
Political Background
--------------


4. (SBU) Ironically, the party that has led Ireland through
most of the Celtic Tiger era, Fianna Fail, has seen a recent
erosion in its political support. In the June 2004 local and
European Parliament elections, Fianna Fail lost a number of
seats to opposition parties, led by Fine Gael and the upstart
Sinn Fein. Commentators attributed Fianna Fail's poor
showing to the electorate's sense that not all segments of
society have shared the benefits of the Celtic Tiger economy,
as reflected in growing crime rates and other social
problems. In a bid to re-energize the party and government
ahead of the 2007 general elections, Prime Minister
(Taoiseach) Bertie Ahern re-shuffled his cabinet in late
September. The move presages an effort by Fianna Fail to
recast its image as a party more attuned to social concerns.

--------------
The Government Budget
--------------


5. (SBU) Estimates for the 2005 government budget, to be
released on November 18, will set forth Fianna Fail's
economic priorities in its bid to rebuild political support.
Although a budget deficit was originally forecast for 2004,
increased revenues tied to economic growth and one-off tax
collections on off-shore bank accounts will yield a year-end
budget surplus of 0.3 percent of GDP. Some ruling party
members have pressed new Finance Minister Brian Cowen to use
this unexpected windfall to address hot-button social issues,
including Ireland,s dysfunctional health care system and
outdated transportation infrastructure. The Irish Central
Bank and most economists, however, have cautioned against
steep increases in government spending that could fuel
inflation, particularly with robust GDP growth predicted for

2005. In recent public comments, Minister Cowen has
indicated that that the budget will offer tax relief for
lower income groups, but will avoid inflationary pressures
that could raise wage demands and erode Ireland,s
competitiveness.

--------------
Competitiveness -- The Central Focus
--------------


6. (SBU) Maintaining Ireland's economic competitiveness is
increasingly the focus of the Government as it attempts to
safeguard the prosperity achieved during the Celtic Tiger
period. Although inflation in 2004 has converged toward the
EU average of roughly 2%, EU studies indicate that Ireland is
now the most expensive country in Europe. Ireland's 12.5
percent corporate tax rate remains a powerful draw for
foreign direct investment. Over the longer term, though,
Ireland will face challenges in competing with alternative
FDI destinations such as China, India, and the EU accession
states, which boast educated, low-wage workers and
opportunities for low-cost manufacturing. Several
government-commissioned task forces have advocated a strategy
whereby Ireland would move increasingly out of simple
manufacturing operations and into innovative, higher-value
goods and services. This strategy will require an education
system that can produce graduates with skills in technology
and physical sciences to support a knowledge-based economy.
At Dublin City University, you will be able to speak with
faculty and students about the role of academia in sustaining
Ireland,s economic success.

--------------
Northern Ireland Negotiations
--------------


7. (SBU) Negotiations on a final settlement for Northern
Ireland are likely to intensify during the week of your
visit. The British and Irish Governments are preparing a
proposal for Northern Ireland's unionist and republican
political parties on a settlement that would restore Northern
political institutions over the coming months. This proposal
will likely build upon progress that was achieved in the
September Leeds Castle talks, where Sinn Fein signaled the
IRA's willingness to cease paramilitary activity and
decommission weapons as part of a final deal. Northern
Ireland is the fastest growing region in the UK, and a
political settlement would help to accelerate growing
inter-Ireland trade and investment.
KENNY