As this is Ireland I've got to assume there is also an element of trying to reduce the numbers who are technically unemployed and so make things look better. It sounds very familiar to the community employment schemes etc. from the '80s where people basically worked for their unemployment benefit so as to gain work experience / help the community. I can even remember being turned down at an interview for one of these way back when and feeling pretty bad.
In the end some people will gain something & some people will be exploited but it wont make much difference to the economy other than to help drive down wages.
I'm not sure if you can be on the unemployment register and still work in an internship. I wouldn't be surprised to learn that the government isn't looking too deeply into the situation because it keeps the dole numbers down.
