Chasing green has the Irish seeing red

Maeve O'Mara sensed a reckoning was near for Ireland during a trip in 2007, when she found herself counting the number of new Lexus SUVs clogging Dublin's narrow streets.

Kieran Folliard's moment came during a visit to his family's home in Ballyhaunis in County Mayo, when he heard that a plot of land outside the rural village was listed for the equivalent of about $20 million.

"I thought, 'This is unsustainable,'" said Folliard, who owns four Irish pubs in the Twin Cities. "It was like everyone was playing a great big game of musical chairs."

When the music finally stopped, the Irish were left without a chair and holding the bag, too.

Woe knows no borders in a global economy, and as Ireland's economy shrank an unprecedented 13 percent in 2008 and 2009, Minnesota exports to the country fell. While much of those exports reflect transfers between Minnesota medical device companies and their subsidiaries in Ireland, the decline in economic activity has been sharp. In 2005, Minnesota exports to Ireland totaled $1.5 billion. Through the first six months of 2010, that total had shriveled to $229 million.

Lisa Curtain of Plymouth started a business development group to help Irish companies expand in the United States. Eventually, she launched a software company of her own in Dublin, where she also bought a house. Today, her company is shut down, and she hasn't been back to Ireland this year. The local chapter of the Ireland Chamber of Commerce in the U.S., which Curtain founded, is inactive as well.

"At the moment, I'd much rather be here than there, seeing it firsthand, because it's been pretty sad," Curtain said.

On this, Ireland's hands were tied. Google, Hewlett-Packard and other firms warned they'd leave if the government raised the tax rate which, at 12.5 percent, is one of Europe's lowest.

Minnesota companies were among those lured to Ireland by its educated workers, low taxes, and a national health care system that frees them from having to provide that benefit. Medtronic, which has been in Ireland since 1999, employs about 2,000 people in the country. The company said last week that recent events have had no impact on its operations.

Chaska-based Lake Region Medical, which bought land in Ireland in 1994, now employs nearly 800 at two locations. While company officials closely followed the debate about higher taxes, "we try not to be reactionary," said Ron Von Wald, Lake Region's global director of marketing. "Efficiency is really our focus, and we've always been able to grow in Ireland."

O'Mara, who was raised in Crosshaven in County Cork, moved to Minnesota in 1986. She owns Irish On Grand in St. Paul with her husband, Liam O'Neill, also of County Cork. Both were in Ireland for three weeks last summer. As bad as things have become, they see the wisdom of not raising corporate taxes in a country where, with a population smaller than Minnesota, U.S.-based corporations employ roughly 87,000 people and the unemployment rate already stands at 14.1 percent.

"I don't think the economy could handle any more job losses," O'Neill said.

At its peak, the price for developable land in Ireland was higher than anywhere else in Europe. Home prices were rising faster in Dublin than in Los Angeles or Miami.

"I have friends who bought two or three homes, which they rented to foreign nationals who came for the jobs," Folliard said. "The Poles have left, the Brazilians have left, and now the houses are empty."

A government report issued last month concluded that there are 2,800 unfinished housing developments. These "ghost estates" include about 43,000 homes that are either built and empty or unfinished.

Ireland's six big privately held banks, with borrowings from across Europe, financed the property binge. When the financial crisis worsened in 2008, the Irish government stepped in and, incredibly, pledged to back not only bank deposits in their entirety but also all bank debts.

In other words, the Irish people will pay a steep price for speculating in real estate, but the careless lenders and investors across Europe who loaned money to Ireland's banks will not.

"There's anger and a great sense of loss," Folliard said. "But there's a lot of self-reflection, and a sense of an opportunity missed."