Professor Niamh Hardiman:

Both were very important. If we look at what happened to the growth model Ireland was following in the 2000s, the emphasis shifted a little from the 1990s. Economists tell us that the Celtic tiger economy had two phases. During the 1990s growth in productivity and adding new resources to the economy were generating a strong export performance and a strong performance in traded services. After 2000 there was a shift towards investment in capital stock, most of which was going into construction, especially housing. There are many reasons for this. The Irish population was growing and there was a housing shortage; perhaps the early indicators of the housing bubble that were first explored in the late 1990s did not necessarily see the full magnitude of what was coming along. The context had changed a great deal, of course. By 1999-2000 we were living in the eurozone and very cheap credit was available. We now see the fiscal incentives to facilitate additional economic activity in the area of construction were misplaced in terms of generating a long-term sustainable growth model. They were also unwise in a context where it was becoming very much cheaper to borrow and use money in the banking sector. There were tax breaks for construction and incentivised building supports for quite a long time. It was well into 2005 and 2006 before these started to be withdrawn.