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Sovereign Debt

Ireland's Economic Recovery Shows at Galway Races

Galway Races

Photograph by Pat Healy/AFP Images

Galway Races

Celebrating his long-shot victory at Galway Races, local lawyer Joseph O’Hara heads to the Champagne tent to spend some of his €1,000 ($1,300) winnings. The seven-day festival in Ballybrit, which started on July 28, is the biggest of its kind in Ireland and has reflected the health of the economy. During the Celtic Tiger boom, it buzzed with helicopters, alerting punters to the arrival of the nation’s richest developers and bankers. Then came the collapse of the real estate market and an international bailout, and attendance and betting plunged.

Crying aloud as the racecourse is,

And we find hearteners among men

That ride upon horses. —From Yeats’s At Galway Races

With the economy improving and Ireland back in the good graces of global bond investors, punters are returning. The crowd of 140,000 for the festival was 9 percent larger than in 2013 and thronged the course and its Laurent-Perrier Champagne and Guinness tents, where stout, oysters, and smoked salmon were served. “The general feeling is that the worst is over,” says O’Hara, after backing a horse named Legatissimo that gave him odds of 20 to 1. “We’ve endured six years of austerity, and it’s been pretty miserable.”

Employment is rising, and home prices in Dublin are soaring. Consumer spending, which amounts to about half of gross domestic product, will rise this year for the first time in four years, the country’s central bank forecast on July 28. Four days later, the Bank of Ireland (IRE) said it posted its first profit since 2011 in the first half of 2014, with Chief Executive Officer Richie Boucher telling national broadcaster RTE that the lender is starting to see a recovery in the domestic economy.

Four years after bond investors turned their backs on the country’s debt, Ireland is again able to borrow in international credit markets—at record-low yields. The yield on a benchmark 10-year bond was 2.2 percent on Aug. 4, compared with a peak of 14.2 percent in July 2011. “There have been clear signs of stronger personal expenditure,” says Alan McQuaid, an economist at Merrion Capital in Dublin. “Although there is still a general air of caution among consumers, there seems to be a view that the worst is over following the downturn.”

At the peak of the Irish boom in 2006, about 217,000 people showed up at the Galway festival, which dates to 1869 and was the inspiration for At Galway Races, a poem by William Butler Yeats. “Racing has always been a great barometer for the economy,” says course manager John Moloney. “There was a terrific crowd here last night. The betting was good. There must be more money around.” Ladbrokes took in €1.5 million, says Justin Carthy, head of racecourse management at the U.K. bookmaker. That’s about the same as last year and down from the peak, though it’s double what was staked just after the crash. “Last year the turnover came back slightly,” says Carthy. “It’s still a long, long way behind where we were at the crazy times.”

The bottom line: As Ireland’s economy gains strength, the yield on the benchmark 10-year government bond has fallen to 2.2 percent.

Griffin is a reporter for Bloomberg News in Dublin.

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