By 2000, Ireland had achieved a remarkable
macroeconomic performance: 10% economic growth annually,
a budget surplus, and a very low debt to GDP ratio.
Emigration had disappeared and there was significant
immigration from Eastern Europe. Yet, by November 2010,
output had collapsed to an extent unprecedented among
post war industrial countries, the budget deficit was
out of control, and the debt to GDP ratio had soared to
around 100%. In an unprecedented development, Ireland
was forced to apply for an emergency bail-out package
from the Troika (European Commission, European Central
Bank, and the International Monetary Fund).
This
book examines how the Celtic Tiger, a high growth
performing economy, fell into a macroeconomic abyss. It
is a story that shows how the Irish economy moved from a
property market crisis to a banking crisis and fiscal
crisis, and how these three crises led to a fourth
crisis, the massive financial crisis of 2010. Against
the backdrop of the newly created Eurozone, the book
demonstrates how a housing boom was transformed into a
property market bubble through excessive credit
creation. Accompanying the market bubble, buoyant
property related taxes enabled a profligate government
to over spend and under tax. Few, either in Ireland or
Europe, recognised the danger signals because the
prevailing economic ideology suggested that financial
markets could self-regulate.
The book analyses
the roles of banks, builders, developers, regulators
(the EU, the ECB, the Central Bank of Ireland, and the
Irish Financial Regulator), politicians, economists, the
media, and a property driven populace during the various
stages of the downfall of the Celtic Tiger. It pays
particular attention to the decisions to provide a
highly controversial comprehensive guarantee for the
covered Irish banks in 2008, and the subsequent events
that left the government with no alternative but to
request the 2010 bail out. Throughout the book,
attention is devoted to the allocation of
responsibilities for the unfolding crises. First, who or
what was responsible for what happened and in what
sense? Second, could specific actions have been taken at
various stages to prevent the final recourse to the bail
out? Finally, the book addresses the future of the
Celtic Tiger. It discusses the impact of measures to
help resolve the current Euro debt crisis as well as the
underlying lessons to be learned from this traumatic
period in Ireland's economic and financial history.
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