The Irish finance ministry forecasts that GDP will decline by 4% in 2009 and unemployment will hit 10% by the end of the year. The budget deficit will reach 9.5% of GDP, well outside EU norms. Forecasts like this prompted S&P to put Ireland’s debt on watch for downgrade earlier today, helping sink the euro.
For a little perspective, back in the early 1990s before the birth of the euro, Ireland routinely had unemployment rates in the 20s. Too-low interest rates for the Irish economy prompted a property boom which overheated the economy, resulting in the present bust. The inability to adjust interest and exchange rates as needed turned Ireland into the poster child for the unintended consequences of currency union.