The country known formerly as the Celtic Tiger is gripped by the worst recession of any developed country, according to a report this week. Irish anxiety about the collapse of its glittering economy may finally convince voters, however, to vote “Yes” later this year in a second referendum on the Lisbon treaty. That would bring the grand EU scheme for running itself back from near-death, although other threats to it remain.

A few years ago Ireland was the star exhibit of the EU: from poverty to riches in a generation, courtesy of grants from Brussels. “We want to be Ireland,” one Romanian official mused wistfully on the verge of his country’s accession to the EU in 2006, while admitting sadly that the goal was then out of reach.

The new projections cannot be faulted for drama. Unemployment to reach 17 per cent this year and 400,000 will be out of work by the end of 2010 (a third more than now). Gross domestic product to fall by 12 per cent by 2010 – a drop not seen since the 1930s, and worst in the developed world.

House prices to fall by a third from their 2007 peak. Government debt to rise from 41 per cent of GDP to 70 per cent next year. The budget deficit to hit 12 per cent of GDP this year – four times an EU limit despite spending cuts and tax increases in the emergency Budget held this month.

The consequences of Ireland’s dependence on the property boom for its banks and budget deficit have been clear for months.

“You’re talking about the biggest contraction in an industrialised country since the Great Depression,” said Alan Barrett, of the government-funded Economic and Social Research Institute, which put forward the detailed projections. In a phrase that was offered conversationally at the release of the report he added: “It is possible that people like Zimbabwe have bigger contractions, but you know when you’re in trouble when you’re saying at least we’re not Zimbabwe.”

True; Ireland is not a pariah. It is a member of the EU and euro zone, and Micheál Martin, the Foreign Minister, claimed that the European Central Bank (ECB) has been essential in restoring confidence in the banking system. Opinion is divided, however, between those who agree and those who think that the euro is a painful constraint.

For now the markets seem willing to accept reassurance. They are nervous of Irish debt, but not expecting default. Moves to relieve banks of bad property loans have been welcomed cautiously.

Ministers have started to think that the crisis might even solve one of their worst problems: persuading voters to back the second referendum on the Lisbon Treaty.

Ireland brought EU expansion to a halt last year by voting “No” to the new rules for making decisions. The perceived value of ECB support and the possibility of other aid has beyond doubt helped to change minds. So has reassurance about Irish neutrality and the concession that it could keep its commissioner. A poll in February found that 51 per cent would say “Yes”.

That does not mean that the treaty will survive. It faces obstacles in Poland and the Czech Republic – and maybe Britain. William Hague, the Shadow Foreign Secretary, told The Times this week that if the Tories were in power they would hold a referendum, if the treaty was not already ratified by all EU members, and urge Britons to vote “No”.

By then Ireland may have voted “Yes”. Ireland is a lesson in how quickly the finances of a country can turn bad. It may also prove a lesson in how quickly voters run to the shelter of a club whose grand plan they so recently chose to defy.

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