Ireland debt crisis

In November 2010, EMU member Ireland was on the brink of national bankruptcy. In the wake of the financial crisis that followed the subprime crisis, the country’s government was forced to spend more than one-third of government revenues to bail out domestic banks over a period of several years. By the end of 2010, the non-performing loans of the six most important Irish banks had accumulated to a sum that was roughly half of the country’s economic output. German institutions had claims on Irish borrowers of more than EUR 25 billion at the end of 2010. The European stabilization mechanism felt compelled to help Ireland. The country received a loan of EUR 85 billion from the EU and the International Monetary Fund. – Irish public finances were in good shape before the crisis. The country became vulnerable due to persistent misallocation of capital, especially into construction activity that far exceeded demand and into a bloated financial sector. – On the other hand, the Irish crisis in Germany led to a strong push in the basic sentiment of the population to exclude financial aid to other states; especially when it also became known that despite the crisis in Ireland, the per capita income in Dublin is higher than in Berlin. – In December 2013, Ireland was able to leave the European Stabilization Mechanism; its economic data had improved significantly thanks to a targeted austerity policy. Admittedly, the Irish central bank had taken over bad debts of failed banks amounting to more than twenty percent of Ireland’s social product into its portfolio. – In 2014, there was a proliferation of reports – even in the respectable media – that Ireland had been in perfect financial health in 2010. Some machinations had sought to incapacitate the country and make it entirely dependent on European institutions, with the ECB ascribed an evil role in such a game. In a hitherto unprecedented move, the ECB then published its files on the Irish crisis in early November 2014. They set out in no uncertain terms that Ireland was in a severe domestic economic crisis in 2010 and sought assistance from the European Stabilization Mechanism and the ECB, without whose help the country would have slipped into sovereign default. – See bailout, blame game, ClubMed, eurobonds, common, Eurostat, exit, Finland, Greek crisis, default, Minhas-Gerais problem, moral hazard, Plan C, Portugal crisis, shadow state, solidarity, financial, stabilization mechanism, European, Stability and Growth Pact, fundamental error, sovereign debt, effects, statistics authority, transfer union, redistribution. central-bank-induced, debt-productivity linkage, conspiracy theories, two-way option. – Cf. ECB Monthly Bulletin, December 2010, pp. 89 ff. (the assistance to Ireland in the web of other aid).

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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