DUBLIN, IRELAND — When Ireland entered the world's most ambitious economic alliance -- the European Union -- more than a decade ago, the Celtic Tiger roared to life. Membership in Europe's private club, along with the subsequent adoption of the euro, lured scores of multinational companies to this country and ushered in an unprecedented era of growth.
But as Ireland faces its worst recession in a quarter-century, the policies and institutions that bind the European Union now represent some of the country's biggest obstacles to recovery.
The global credit crunch has silenced the construction cranes that transformed Dublin from a sleepy backwater to a major financial center. Yet the Irish are finding they have fewer and fewer ways to get them started again.
In surrendering monetary policy to the European Central Bank and agreeing to meet specific budget targets, Ireland and other EU countries are now handicapped in their ability to craft responses to specific economic challenges.
As a result, economists say, the recession in Europe is likely to be even deeper, and last longer, than the one in the United States, making it more difficult for the global economy to bounce back quickly.
"The structural problems in the United States are on an order of magnitude less than in Europe," said Constantin Gurdgiev, an economist and research director of NCB Stockbrokers in Dublin. "Ireland is now the litmus test for the European model -- a test of whether it will work or whether it won't."
Seeking solutions, European leaders are pushing sweeping reforms of the world financial system. Pressing for such moves as global guidelines on executive pay and universal accounting standards, they are calling on the United States and other major nations to sign on to their plan within 100 days.
Their urgency stems from the fast-deteriorating economic picture at home. Although the United States is set to shrink by 1% next year, the 27 EU nations may contract by an average of 1.4%, according to Tom Mayer, chief economist for Deutsche Bank in London. The former dynamos of the region, including Ireland and Spain, appear likely to be hit hardest, with unemployment in Ireland already at an 11-year high and, analysts predict, likely to get much worse.
