This year the four million residents of this State will have made some six million journeys abroad, almost 3.5 million of them to other EU countries with which we share the euro. Even allowing for multiple trips abroad by a proportion of our population, these figures clearly suggest that a majority of our people now travel to other eurozone countries every year.
This means that during the couple of years since the introduction of the euro a large proportion of Irish people have for the first time had an opportunity to compare Irish prices directly with the prices of goods in other EU countries. They have found these comparisons to be uniformly unfavourable: hence the "rip-off" syndrome.
That was not always the case. OECD figures suggest that in 1997 Irish prices were lower than in most continental countries other than Italy and Spain - but are today substantially higher. And in the case of Spain, which is by far the most popular continental destination for Irish people, the price differential is particularly marked.
What went wrong after 1997? Whence came inflation?
Between 1981 and 1987 inflation had been reduced from a frightening annual 21 per cent to 3 per cent. The table below shows the cumulative increases in Irish and EU prices in three subsequent periods.
Between 1988 and 1994 several Fianna Fáil-led governments held the inflation rate to the same level as that of the rest of the EU, namely, well under 3 per cent a year. And, during the following period of the rainbow coalition, the inflation rate actually fell back to 2 per cent a year, one-fifth below the EU rate of almost 3 per cent.
However, between 1997 and 2004 the rate rose almost twice as fast as that of the rest of the EU. It is to this loss of control over inflation, most marked in the years from 2000 to 2003, that we owe the dramatic deterioration in Irish prices relative to those in the rest of the EU and consequently the reduced competitiveness of our economy.
How did this post-1996 development relate to the Celtic Tiger? Clearly rapid economic growth always carries with it a risk of inflationary pressures. This is something that a wise government will want to keep under control, especially when growth is leading towards full employment.
In the early years of the Celtic Tiger inflation had been successfully kept at bay, with prices rising more slowly than in the rest of the EU. This was helped by the fact that, although unemployment had been falling rapidly from its 16 per cent peak during the years since 1993, at the end of 1997 it was still close to 10 per cent.
However, in that year wage inflation had started to attack the construction industry, while the hourly pay rate of skilled workers, previously rising by 5 per cent a year, jumped by 12 per cent. That was followed in 1998 by a similar acceleration in the growth of hourly pay in the industrial sector, rising from 5 or less to 9 per cent.
With control already being lost over wage costs in 1998, two years in advance of the actual achievement of full employment, and with Ireland barely three years away from joining a single European currency (within which devaluation would cease to be a means of protecting competitiveness from inflation), the primary task of the Government elected in 1997 was clearly to damp down demand with a view to preventing the economy from losing competitiveness at such a crucial moment in our economic history.
Instead, in something akin to a repetition of the blunders made in the late 1970s, the new government's finance minister, Charlie McCreevy, at once put his foot on the accelerator rather than on the brake, choosing to inflate demand in 1998 by cutting both the standard and higher tax rates. His justification for this was a curious claim that these tax cuts would "ease pressures on the labour market" and "keep inflation under control".
Instead, of course, they boosted consumer demand, which during the immediately preceding 12 months had already started to surge forward at a rate of over 7 per cent a year.
In 1999 more income-tax giveaways followed, in addition to which current Government spending was increased by more than 10 per cent, and in the next couple of years this was followed by further income-tax cuts. Worse still, in those two years, 2000 and 2001, current Government spending was increased by 21 per cent and 17 per cent respectively.
Inevitably this gross stimulation of excess demand, at the very time when we had just attained full employment, set off a serious bout of inflation. In 2000 prices rose at well over twice the rate for the rest of the EU, and price increases remained at twice the EU level throughout 1999-2003.
By last year the cumulative effect of this perverse McCreevy policy had pushed consumer prices up by 28 per cent above their 1997 level, in a period during which in the rest of the EU prices had risen by only 14 per cent. Our competitiveness had been seriously eroded.
The level of economic incompetence in this whole process is deeply disturbing. It does not appear that McCreevy ever understood the inevitable consequences of his actions and he clearly refused to listen to the advice of his own officials.
It is difficult to avoid the conclusion that a factor contributing to the mishandling of the economy during those years was a concern at all cost to win the general election of 2002. That would have been bad enough, but unhappily a doubt as to whether the election might perhaps have to be held a year earlier, in 2001, seems to have led to two successive election budgets, with current public spending being allowed to run out of control in both 2001 and 2002.
In those two years such spending was boosted by a total of 42 per cent, and it is now clear that we received poor value from that splurge.
The most disturbing feature of the mess in those years is that, although under Brian Cowen the current situation has been brought back under control, the harm done under that pre-euro period is irretrievable. We can no longer seek to mitigate the loss of competitiveness by means of a devaluation.
Short of imposing pay cuts on all, there is now simply no way to restore our impaired competitiveness. And the sense of a "rip-off" culture, arising from our domestic prices visibly rising well above those of EU partners, has also become a destabilising factor.
Irish and EU inflation
Ireland EU
1988-1994 17 % 16.8%
1994-1997 6.4% 8.5%
1997-2004 27.7% 14.5%