EU Competitiveness and Irelands Efforts to Enhance Domestic Growth

Ireland’s National Competitiveness and Productivity Council published its Competitiveness Challenge 2025 report recently and to be fair to them its a thorough piece of work. It identifies real problems. It makes twenty recommendations. It uses all the right phrases – “infrastructural shortfalls,” “labour force evolution,” that sort of thing – and if you read it carefully you come away thinking yes, Ireland has challenges, and yes, these are reasonable suggestions.

What you don’t come away thinking is that anyone who wrote it was scared. And someone should be, because what the report actually describes, once you strip away the careful language, is an economy that has built extraordinary prosperity on a foundation that could shift at any moment and a political class that responds to this by commissioning another report about how to optimise the margins.

There is, to paraphrase Father Ted, always something to be said for another report. We are, and I cannot stress this enough, very good at the reports.

What the council’s own numbers say

Labour productivity in Ireland fell in 2023. First decline in recent memory. Driven by the multinational sector, which is the polite term, used by people who think of T.K Whitaker as the respectable architect of our economy, for the engine our economy relied on for thirty years.

Non-residential electricity rates are among the highest in the EU. The report attributes this to market volatility and, somewhat delightfully, “insufficient infrastructural commitments.” All of which is to say that Irish governments going back two decades failed to build the energy infrastructure the economy needed and now every business in the country is paying for that failure every single month. But sure look, insufficient infrastructural commitments sounds better in a PDF.

Lifelong learning participation is 18 percent, below the EU average. Population heading for 6.3 million by 2040. Housing, water, energy, transport – all already buckling under current demand. Construction productivity trails Norway, partly because we’ve been slow on modern building techniques and partly because the planning system exists primarily to give retired solicitors and newspaper editors something to do over the weekend.

The twenty recommendations cover fiscal discipline, insurance reform, infrastructure, skills, digital transformation, SME innovation support. Fine. All fine. Not one of them comes within a country mile of the actual scale of the problem.

The thing nobody in official Ireland will say out loud

The council flags soaring energy costs but wont touch the EU emissions trading system thats pushing them up. It recommends aligning with EU industrial policy without ever asking whether that policy might be part of the problem.

Mario Draghi said it last year and he wasn’t being subtle about it: Europe is falling behind. I mean people laughed at him inside the EP but he did say it. Productivity growth has lagged America for twenty years. The technology investment gap is getting worse. And a major reason, not the only one but a major one, is that European institutions have spent two decades building a regulatory environment so dense and so expensive to comply with that it has become a competitive disadvantage all by itself.

The Green Deal is the most obvious case. Rigid timelines dreamed up by people who have never had to meet a payroll. Technology mandates that pick winners before the race has started. An emissions trading system that has jacked up energy costs to the point where energy-intensive manufacturers aren’t adapting to the new reality – they’re just leaving. Quietly. Without a press release. Moving to Turkey, moving to the US south, moving to anywhere the cost of keeping the lights on doesn’t make their products uncompetitive before they’ve even shipped.

Europe produces about 8 percent of global emissions. If the policy response to that 8 percent is to make European industry uncompetitive without meaningfully changing the global trajectory, what you’ve got isnt climate policy. Its economic self-harm and someone has stuck a green sticker on it and called it progress.

Nicola Procaccini at the ECR has been banging this drum and I think the argument is largely right. The diagnosis phase is finished. Everyone who’s looked at the data knows what’s wrong. The question is whether the response is more managed tinkering inside the existing framework, which is what the Irish report amounts to, or whether someone is going to be honest enough to say the framework itself needs rebuilding.

Why this is existential for Ireland specifically

Corporation tax. Thats the whole story and everyone in Merrion Street knows it even if they’d rather talk about anything else.

Ireland built its economic model on attracting multinationals with a favourable tax regime and it worked brilliantly. Spectacularly well. But it means that the country’s prosperity depends on decisions made in boardrooms in San Jose and Boston about where to book profits and park headcount. When the OECD global minimum tax kicks in properly, some of that advantage goes. When American trade policy turns protectionist, and it has, Ireland’s exposure is immediate and existential. The NCPC report itself flags this: significant US trade dependency, tariff susceptibility. They just didn’t follow the thought to its conclusion.

What does the Irish economy actually look like if the multinational pillar shrinks by even 15 or 20 percent? What is the extent of the contagion? Would we see sectoral wages fall into deflationary spirals? Where does indigenous productivity growth come from when electricity is among the most expensive in Europe, planning takes longer than construction, the skills pipeline is thin, and the regulatory burden keeps growing? In review, was it a good idea to make the entire budgetary current surplus dependent on 3 multinational firms?

The report has no answer to this. To be fair to it it cant really have an answer because answering honestly would mean questioning the EU regulatory framework that Ireland’s political establishment has spent thirty years defending. You cant simultaneously argue that EU mechanisms are the solution and admit they’re contributing to the problem. So the report does what all these reports do — recommends reforms within the framework and hopes the framework holds.

What should actually happen

The ECR position is straightforward enough. Let the market find the cheapest route to lower emissions instead of mandating specific technologies that may or may not work. Redirect EU spending toward energy sovereignty and critical raw materials instead of compliance bureaucracy. Cut the regulatory burden to a level where European businesses can compete with American and Asian rivals who operate under vastly lighter regimes.

Twenty years ago this would have been standard centre-right economics. The fact that it now sounds radical tells you everything about how far the ratchet has turned.

Ireland needs this more than most. The NCPC’s twenty recommendations might buy time. They wont fix the structural problem and the people who wrote them almost certainly know it. The question is whether Ireland keeps producing competent reports about an economy thats slowly losing its foundations, or whether someone in government finds the nerve to say that the foundations need rebuilding — even if that means having an uncomfortable conversation with Brussels about what the regulatory project has actually cost.

For a country sitting on a tax base that could narrow at any point, this is not an abstract debate. Its the most urgent economic question Ireland faces. And the answer isnt another report.