When Banks Cannibalise a State: Analysing Ireland’s Financial Crisis

Ireland’s banking crisis was described by the IMF in early 2009 as matching ‘episodes of the most severe economic distress in post-World War II history’, yet measures taken since 2008 to overcome it have only served to worsen the crisis. Hailed for over a decade as the ‘Celtic Tiger’, Ireland’s economy collapsed in 2008 as falling property prices exposed huge liabilities in its banking system resulting from reckless lending to builders and developers. This paper describes the trajectory of Ireland’s worsening banking crisis from 2008 up to the acceptance of an EU/ECB/IMF rescue package in November 2010 and a four-year austerity plan to reduce the budget deficit from 32% of GDP. The paper links the crisis to features of the development model that brought high economic growth from 1994 to 2007 and ends by examining the prospects for overcoming the current crisis