Cuts to Irish wages and salaries prevented the jobless total from getting even higher, according to the Governor of the Bank of England.
The Irish public deserves ‘’great credit’’ for the flexibility shown during the economic downturn, according to Mark Carney.
‘’Wages in Ireland fell by almost 9pc. In Spain they rose by 3pc,’’ he said during a special visit to Dublin.
‘’Even though Irish unemployment rose to painfully high rates, it peaked at only a little over half the rate reached in Spain,’’ he added.
Mr Carney said this policy of trying to keep the unemployment rate at a certain level reduced the risk of joblessness becoming entrenched, which would have seriously damaged future economic growth.
But he also referred to the high level of borrowing for personal spending and investment in property - rather than productive business activity - during the Celtic Tiger years.
He was delivering a special lecture on international economic trends at the Department of Foreign Affairs, attended by Finance Minister Michael Noonan, and the Governor of the Central Bank, Patrick Honohan.
Referring to current economic challenges, he stressed the importance of ‘’having a plan and implementing it diligently and clearly’’.
Mr Carney said if there is no clear cut strategy when it comes to economic planning, businesses and households will shy away from the risk-taking needed, for sustained global expansion.
‘’Europe needs a comprehensive, coherent plan to anchor expectations, build confidence and escape its debt,’’ he added.
He said the ECB needs to be ‘’bold’’ in its decision making but that will not suffice on its own.
‘’As of this evening, progress on structural reforms in the euro area remains uneven.
‘’Europe’s leaders do not currently foresee fiscal union as part of monetary union.
‘’The burden of adjustment has been concentrated on efforts to improve competitiveness.
‘’Boosting productivity reduces the burden of a debt overhang as extra supply creates extra demand and incomes. But that takes time, during which debt dynamics may become oppressive.’’
He warned that while improved competitiveness will support exports to the rest of the world this ‘’is unlikely to be decisive’’ in a listless world economy.