Michael Reynolds-11538777Choose one financial crisis associated with a particular country and produce a research paper based on your work. The paper should be a critical review of a particular crisis and may focus on the causes, responses, consequences of such a crisis and the political economic policies associated with it: Examine the preceding causes of the economic crisis that unfolded in Ireland in 2008 and the government responses to it. Assess the subsequent political and economic consequences of the crash.

Following the international financial crisis in 2008 the Irish economy suffered through one of the most severe economic contractions in the Western world. Ireland as a country has been no stranger to recessions, the country experienced decades of economic stagnation following the countrys independence in 1922. However even by Irish standards the 2008 crisis would go on to become one of the most severe and prolonged recessions not seen since the second world war. The Celtic Tiger miracle economy that had roared through the 1990s and early 2000s resulted in unprecedented levels of economic growth and prosperity. This left many commentators and experts of the view that the country would experience a soft landing should any International recession occur. These inaccurate predictions by the overwhelming majority of economic commentators, politicians, International institutions as well as media reports would prove to be fatal following the onslaught of the global recession and banking crisis of 2008. In this paper I will examine the background to the Celtic Tiger economic boom of the 1990s and 2000s and the subsequent causes of the Irish economys crash. The primary causes of the Irish recession were domestically created by the huge erosion of the tax base and the inflating of a property bubble as well as a generally reckless fiscal policy pursued by the government. Contributory factors to these causes of the crash here were several external factors such as Irelands entry to the economic monetary union and the global downturn itself which affected Irelands export based domestic economy due to the exceptionally large contribution these exports make to the States GDP. Following this I will assess the responses to the crisis that were pursued by the government of the day such as the blanket guarantee scheme of September 2008, the establishment of NAMA and the fiscal consolidation subsequent to the crash. From this I will look at the dramatic consequences the crash had on the country, the most significant being the loss of the countrys economic sovereignty following the intervention of the troika in November 2010. In closing I will assess the countrys position going forward having successfully emerged from the EU-IMF bailout and the recently improving economic conditions for the country.

The Irish economy from the early 1990s through to the mid-2000s experienced an economic boom which by any standards was extraordinary. 1 (Honohan, P. page 2)

The Irish economy was among the best performing economies on the globe in the 1990s, this was especially significant given the period of economic instability that preceded it in the 1980s. 2 (Honohan, P. page 2)

This decade was a period plagued by high unemployment, massive emigration, disproportionately high income tax rates and a bloated national debt as a result of years of government deficits. Indeed by the mid-1980s, 3 (Whelan, K. page 2)

the public debt-GDP ratio was over 110 percent and the country was paying out approximately 10 percent of GDP in interest payments on this debt annually. From 1987 a combination of fiscal rectitude, increased labour competitiveness which attracted inward investment from multi-national corporations as well as external assistance from the EU to help invest in the countrys infrastructure, all contributed in sowing the seeds for the Celtic tiger economic miracle. The subsequent economic boom had two phases. 4 (Honohan, P. page 2)

The export led boom based on labour competitiveness from the late 1980s to early 2000s and the construction led boom from the turn of the millennium to the 2008 crisis.

5 (Mac Sharry, R. White, P. page 362/363)

The export led boom of the 1990s driven by a favourable corporation tax rate, improved labour productivity as well as enhanced internationally credibility overall would result in Ireland catching up with the other advanced economies in Europe. 6 (Whelan, K. page 3)

From 1987 to 2007 economic growth averaged at 6.3 per cent annually, while the unemployment rate dropped from a staggering 16 per cent in 1994 to just over 4 per cent by the year 2000, over the same period from 1994 to 2000 GDP grew annually at 8.3 percent. For the first time, Irelands economy had full employment and Irelands public finances remained in a healthy position for the first phase of the boom. This first export based boom would last for most of the 1990s, however once this competitiveness based boom began to slow down Irelands economy continued to grow at a rapid rate. 7 (OToole, F. page 21)

The convergence in to the second phase of the boom occurred around the turn of the millennium whereby a construction boom occurred right up to the crash in 2008. Despite much criticism of this housing boom in recent years, there were strong factors which meant an increase in construction was fundamentally inevitable at the turn of the century. 8 (Whelan, K. page 7)

There was after all a rapidly growing population due to a fall in emigration for the first time in decades as well as an unprecedented increase in inward migration.

The construction bubble began to inflate to unsustainable levels as a result of a variety of factors. At the end of the 1990s Irish banks lending was subject to the level of bank deposits each bank had, in other words the Banks could not lend without an adequate deposit base. 9 (Kelly, M. page 2)

Irelands banks lending to the non-financial private sector was a modest 60 percent of GNP in 1997, this was about a quarter less than the Eurozone average. 10 (Kelly, M. page2)

Indeed Irish mortgage interest rates at this time were generally 10 percent or above while in the same period the average first time buyer in Ireland took out a mortgage roughly equal to three years average gross earnings. 11 (Kelly, M.page 2)

By 2008 non-financial lending had risen to over 200 percent of GNP, while house prices had ballooned to over eight times the average Irish income and an astounding 17 times of average earnings for first time buyers in Dublin.12 (Kelly, M. page 2)

This increase in house prices was the result of a property bubble that was overheating so much so that completion of new housing units dwarfed from 30,000 units in 1995 to over 80,000 in 2007, this was almost half the level of new completions in Britain. 13 (Honohan, P. page 9)

The key reason as to why the bubble grew so rapidly was Irelands entry to the European Monetary Union in 1999 which allowed Irish banks and financial institutions to borrow from International markets at a substantially lower rate than before. This facilitated the Irish banks to lend more without the need for a strong deposit base. 14 (Kelly, M. page 4)

By the year 2008 Irish banks were lending 75 percent more in mortgages and 40 percent more to developers, Overall Bank lending more than tripled in the eight year period from 2000 to 2008. 15 (OToole, F. page 102)

The result of these lending practices was a massive increase in mortgage lending at lower rates than ever before which encouraged more people to purchase property, this acted in a tangent with increasing house prices which put mounting pressure on people to get on the property ladder sooner rather than later. Continually rising demand and a dramatic increase in lending by the Irish banks were therefore the primary reason for the evolution of the property bubble here.

16 (Avellaneda, S. Hardiman, N. page page 5)

An appropriate response to the growing bubble here would have been a rise in interest rates by the Central Bank, As this policy lever was not available other corrective measures through government fiscal policy and a more robust regulatory response could have prevented the overheating of the property market. 17 (Avellaneda, S. Hardiman, N. page 6)

As early as 2001 international bodies such as the ECB, OECD and the IMF became apprehensive of the Irish governments pro-cyclical budgets and fiscal policy in general. 18 (Avellaneda, S. Hardiman, N. page 9)

The government however did not pay much heed to these criticisms and a laissez faire regulatory approach as well as inflationary budgets continued right up to the crash in 2008. 19 (Ross, S. page 171)

The strong domestic consensus prevailed that there would be a soft landing for the property bubble here. A direct consequence of this prevailing mentality at government level was the erosion of the tax base here.20 (Honohan, P. page 4)

The tax take composition for the department of finance was radically altered from income tax being the largest percentage of the tax take to other forms of taxation such as corporation tax, stamp duty, VAT and other taxes becoming the largest component of the tax base.21 (OToole, F. page 24)

Large income tax cuts were implemented in parallel with massive capital and current expenditure increases with the result being that it made the Fianna Fail government extremely popular among the electorate, by 2007 the party had won its third consecutive election since 1997 securing 77 seats in Dail Eireann.22 (OToole, F. page 24)

It can therefore with some merit be argued that these fiscal expansionary budget policies at a time of already high levels of growth in the economy were done in the pursuit of electoral gain and political power by the Fianna Fail led government. It must however be noted to the governments credit that not all its economic policies were reckless, 23 (Avellaneda, S. Hardiman, N. page 3)

indeed from 1997 to 2006 the government maintained an average budget surplus, 24 (Whelan, K. page 1)

while also reducing the national debt from 34% of GDP in 2000 to 25% by 2007. Along with this the government set up the National Pension Reserve Fund which at its height accumulated 25 billion euros in funds, roughly 20 percent of GDP for future public sector pension payments. Though the vast majority of this fund would go on to become part of the Troika bailout fund in 2010 it was still nonetheless a prudent economic policy decision that among other academics earned praise from the distinguished economist Patrick Honohan whom described it as the most important initiative in economic policy for the past decade upon its inception in 2001. It is also worth noting that the main opposition parties, Fine Gael and Labour at this time did little to oppose the prevailing consensus of a soft landing for the Irish property bubble. The main opposition to budgets at this time by the two parties was that the government at the time was not spending enough as opposed to spending too much.25(Whelan, K. page 8)

In their 2007 pre-election manifestos both Fine Gael and Labour based there budgetary proposals on annual growth averaging 4.5% over the lifetime of the next government term. It would be an election that these parties would be glad they lost as the International crisis gripped the country within a year of Fianna Fails re-election to government.

26 (Whelan, N. page 333)

A year following the 2007 election, Taoiseach Bertie Ahern announced that he would be stepping down as leader of Fianna Fail and of the FF/Green party coalition government. It was becoming apparent early in 2008 that the economic projections for which the government had based its election promises on could no longer be met. 27 (Cooper, M. page 187)

Serious problems were mounting in the economy with a huge slowdown of construction in 2008, drops in the main Irish Bank share prices after St. Patricks Day of that year and a mounting fiscal deficit in the public finances. 28 (Whelan, N. page 330)

On May 7th Brian Cowen replaced Ahern as Taoiseach while Brian Lenihan replaced Cowen as minister for finance. 29 (Herbert, C. page 48. (Brian Lenihan in calm and crisis))

Shortly after assuming office the new Finance minister remarked that he had the misfortune to of become minister for finance a few weeks ago as the building boom was coming to a shuddering halt. The finance minister realised that the severe shortfall in tax revenue would require an immediate response, 30 (Herbert, C. page 49)

on July 8th he announced a series of measures to achieve immediate savings of 440 million euro to the exchequer. This would be the governments first official response to the unfolding crisis and the first of five austerity budgets over the course of the governments remaining days in office. By now Irelands fiscal position it had become apparent was based largely on the health of the now collapsing property sector.

As unemployment rates increased due to the slowdown in the construction sector and the budget deficit widened from a fall in tax revenues, the Irish banks also began experiencing liquidity problems. 31 (McWilliams, D. page 21)

By September the banks were in severe difficulty, following the collapse of Lehman Brothers in the United States on September 15th the six main lending institutions were on the edge of a cliff. 32 (Carswell, S. page 210)

An international credit crunch combined with the Irish banks large loan books to property based investments left them extremely vulnerable to the crisis. 33 (Carswell, S. page 204)

The first government response to the escalating problem in the Irish financial sector was the expansion of a deposit guarantee scheme on September 20th which increased the government guarantee to all deposits in the six main banks from 20,000 euro which had already been in place up to 100,000 euro. This expanded deposit protection scheme however did little to alleviate the deteriorating situation in the countrys banks. 34 (Ross, S. page 212)

Nine days later on September 29th the Irish stock market experienced its biggest ever one day fall in share prices. The Irish banks were now effectively squeezed from all short term liquidity and faced a very real prospect of total collapse. The two most exposed institutions to the crisis were Anglo Irish Bank and Irish Nationwide, this was due to their massive loan books to property developers and it was feared that if these two institutions collapsed it would lead to a systemic bank failure. 35 (Ross, S. page

The banks along with the financial regulator Patrick Neary and the governor of the Central Bank John Hurley strongly urged the government to introduce a blanket guarantee to protect the Banking system from collapsing. Along with this according to finance minister Brian Lenihan, the president of the European Central Bank Jean Claude Trichet phoned the minister and pressed him to save your banks at all costs on September 28th.

36 (Cooper, M. page 319)

Two days later, on the morning of September 30th the government announced that it would guarantee all deposits, debts and liabilities amounting to 440 billion euro of the countrys six domestically owned financial institutions. 37 (Whelan, K. page 13)

These being AIB, Bank of Ireland, Permanent TSB, Anglo Irish Bank, EBS building society and Irish Nationwide.38 (McWilliams, D. page 22)

The guarantee was based on the Swedish response to a similar banking crisis that stemmed from a property crash there in 1992 and the sole aim of the emergency measure initially was to help the Irish institutions retain and attract new funding. 39(Leahy, P. page 72)

The measure was supported by both the government parties as well as the Fine Gael and Sinn Fein parties when the legislation was brought to the Dail, while the Labour party remained opposed to the measure. In time it would soon be realised that the Banks had not faced a mere liquidity problem but that the Banking sector had in effect become insolvent by September 2008. As well as the initial overwhelming political support for the guarantee domestically, 40 (Carswell, S. page 217)

the government also sought professional financial advice from Merrill Lynch whom estimated that the worst case cost of bailing out the Banks would be 16.4 billion euros. This estimate would go on to be 48 billion euro less than the eventual 64 billion euro that the government pumped in to the banks through recapitalisation to keep the system afloat. The government at this time was stuck between a rock and a hard place, a possible bank failure or underwriting unknown losses. In this instance it went for the latter, had Ireland not been in the Monetary Union, the government could in retrospect have defaulted on certain debt, burned certain bondholders and allowed institutions not of systemic importance to be closed down. Indeed in Irelands subsequent bailout talks with the Troika in late 2010, Brian Lenihan pressed for bondholders to share some of the financial burden but was overruled by the ECB who categorically ruled out any haircuts for bondholders. Once the guarantee was signed therefore the governments options became extremely limited, the ECB categorically would not allow any burning of bondholders, default on debt, or allow any bank to go under. 41 (Leahy, P. page 50)

The banking sectors huge dependence on ECB short term liquidity funding over the next three years of the crisis meant that if the government defied the ECB on any of these policies, Ireland faced the immediate withdrawal of liquidity funding from the ECB, the collapse of the Banking system as a result of this as well as the possibility of being kicked out of the euro entirely. Consequently neither the Fianna Fail led government or the Fine Gael/Labour coalition government was willing to in any way defy the ECB in this respect and the bank guarantee would go on to become one of the most infamous political decisions in the States history.

Following the guarantee in September 2008, the government realised it would have to reign in on the widening fiscal deficit that was occurring in the public finances. 42 (Ross, S.page 206)

The budget for 2009 was brought forward from December to the 14th of October. As opposed to its hesitant response to the Banking crisis, the government moved quickly and decisively to address the looming fiscal problems. The minister for finance stated in his opening speech that we face the most challenging fiscal and economic position in a generation. Lenihans drive for fiscal rectitude was not driven by an austerity ideology, it was simply a matter of economic feasibility. 43 (Honohan, P. page 72 (Brian Lenihan in calm and crisis)))

It had quickly become apparent that without fiscal adjustments, Ireland was heading for annual deficits of over 20 percent of GDP, a simply unsustainable level for any country large or small. 44 (Brian Lenihan budget 2009 speech: part 4, The Financial Context)

For 2008 alone exchequer returns showed an astonishing 8 billion euro drop in tax receipts from a year previous. The result was that unlike other countries facing the global recession at this time there was absolutely no room for any form of fiscal stimulus to counteract the downturn. 45 ((Honohan, P. page 72 (Brian Lenihan in calm and crisis))

The October budget would raise 2 billion euro through tax revenues and spending adjustments to counteract the ballooning deficit, the first budgetary step out of several. Lenihan realised he would have to address the erosion of the tax base that had occurred in the boom times after several giveaway budgets by his predecessors, while also cut back heavily on spending. It was politically unpalatable but none the less absolutely necessary for the States future economic viability.

Following the October budget, the first austerity budget in decades the Irish banks solvency problems became more exposed.46 (Ross, S. page 203)

In December the government announced its first injection of public money in to the Banks, 2 billion euro in to AIB and Bank of Ireland and 1.5 billion in to Anglo. 47 (Carswell, S. page 254)

Early in to the New Year revelations of wrong doing in Anglo Irish Bank led to the resignation of CEO David Drumm and Chairman Sean Fitzpatrick. Following these high profile resignations the bank was nationalised in January 2009. Further bank recapitalisations were needed for each of the countrys banks in 2009 and the government realised it needed a broader solution to repair the banks balance sheets. 48 (Ross, S. page 242)

The next phase of the governments response to the Banking crisis was to establish a bad bank known as the National Asset Management Agency (NAMA) in an attempt to fix the banks balance sheets and restore credit to the domestic economy.49 (Whelan, K. page 14)

How it would do this was issue government backed bonds to the banks and purchase distressed loans off the banks loan books at a discount. The initial amount was 77 billion euro worth of loans purchased at a discount of roughly a third to free up the banks books and allow them to resume lending. 50 (Kelly, M. page 16)

The haircuts applied to the distressed loans varied with larger haircuts of up to a half or more for the more toxic assets within the Banks. In the short term NAMA did little to free up the banks liquidity problems to enable them to lend again, however the removal of these bad loans from the books in the medium term would allow the Banks to return to normalised lending practices and in the long term it is hoped that NAMA will return a profit for the public finances. It remains to be seen whether NAMA will ever return a profit to the public but what is clear is that the governments policy in this regard was necessary to keep the Banking system functioning. It would have been very easy to do nothing on the premise that these bad loans were speculative gambles that went wrong and investors should pay the price, however this approach would have resulted in the Irish banks becoming zombie banks effectively. It must be acknowledged that the banks effectively all but stopped functioning in the early stages of the crisis despite the governments NAMA intervention, however it would have been a much more prolonged and severe situation had the government not intervened with the NAMA model.

Along with the introduction of the NAMA legislation in 2009, the government was forced to introduce a supplementary austerity budget on April 7th of that year. 51 (Brian Lenihan budget 2009 speech: part 4, The Financial Context)

The massive deterioration in tax revenues for the public finances from 47 billion in 2007 to 40 billion in 2008 to 34 billion in 2009 meant the government had no option but to reign in on spending and broaden the tax base. 52 ((Brian Lenihan budget 2009 speech: part 4, The Financial Context)

The measures announced in the April budget would result in a further reduction of just under 1.5 billion in gross public expenditure and additional revenue of 1.8 billion through taxation. Despite this third contractionary budget in less than a year, the widening deficit needed more drastic cuts in spending and larger revenue intake through taxation. 53 (Cooper, M. page 374)

This prompted the government to seek the assistance of UCD economist Colm McCarthy to recommend specific measures that could produce potential savings of up to 5.3 billion euro to the exchequer. The drastic measures included unpopular cuts on current expenditure such as social welfare, education and health. With these three departments being the by far the largest spending departments of the government it would have been simply untenable to exclude them from any cuts that were needed. 54 (Cooper, M. page 413)

The review also called for the removal of 17,300 jobs in the public sector and public sector pay cuts. 55 (Manseragh, M. page 116. (Brian Lenihan in calm and crisis))

The public sector had grown in numbers by 50 percent from the years 2000 to 2008 while over the same period average public service salaries increased by 59%. The result was that by 2009 public sector pay accounted for over 40 percent of total spending for the department of finance. The bulk of the extra tax revenue accumulated in the boom times had gone towards expanding the public sector and rewarding those who worked in it with little or no reform in the provision of public services.56 (Cooper, M. page 374)

An ESRI report in December 2008 showed that lower grade public sector employees earned on average between24 and 32 percent more than there private sector counterparts while senior public sector employees earned approximately 10 percent more.57 (Honohan, P. page 7)

Taking this in to account and with the budget deficit heading towards 10 percent of GDP or just under 16 billion euro for the end of 2009, the government simply had no alternatives but to face up to and address the bloated public sector pay bill.

By the end of 2009 as job losses soared and government revenues continued to plummet the government announced a further 4 billion euro adjustment in expenditure cuts and revenue raising measures for the year 2010. By now Irelands deficit and debt/GDP was among the highest in the Eurozone. 58 Whelan, K. page 10)

Four austerity budgets in the 18 month period from July 2008 to December 2009 had achieved roughly 14.6 billion euros through savings and taxation measures, the largest budgetary adjustment in the Western world. Indeed in the early months of 2010 it seemed that Ireland had come through the worst of the crisis. This however was not to be the case. 59 (Avellaneda, S. Hardiman, N. page 2)

The second half of 2010 brought with it the Eurozone crisis, uncertainty surrounding peripheral Eurozone countries debt sustainability brought Ireland under the international spotlight for all the wrong reasons. Following Greeces financial bailout by the Troika in May 2009, investors became increasingly weary of purchasing Irish government bonds. 60 (Whelan, K. page 14)

In September, two years after the controversial bank guarantee the final estimate of bailing out Anglo Irish Bank came in at the jaw dropping figure of 30 billion euro. The recapitalisation of the bank through government backed bonds known as promissory notes that would make cash payments over the following ten years, equating to roughly 3 billion euro per annum. 61 (Whelan, K. page 14)

The promissory notes however were unexpectedly counted against Irelands government deficit in 2010 due to Eurostats rules, consequently this added a further 20 percent of debt/GDP on to the existing government deficit of 12 percent to GDP resulting in the overall budget deficit reaching a world record 32 percent of GDP. Shortly afterwards, the interest on Irish government bonds shot upwards to unsustainable levels. The government shortly afterwards seized borrowing from the International markets, insisting that the Irish State was fully funded until June 2011.

To respond to the now worsening sovereign debt crisis the government announced the National Recovery Plan for 2011-2014 in which after discussions with the European Commission62 (National Recovery Plan, page 5)

it spelled out a further 15 billion euro in budget adjustments, 10 billion through public expenditure cuts and 5 billion euro in taxation measures. 63 (National Recovery plan, page 5)

The goal was to bring the government deficit down to below the Stability and Growth Pact limit of 3% to GDP. The first of which was a 6 billion euro adjustment for 2011, the largest single contractionary budget in decades.64 (Leahy, P. page 45)

Economist Colm McCarthy put it frankly that Irelands problem is not a lack of will, its a lack of options. 65 (Leahy, P. page 47)

Following the National Recovery Plans publication, French president Nickolas Sarkozy and German Chancellor Angela Merkel made an unprecedented intervention known as the Deauville declaration.66 (Leahy, P. page 57)

In this announcement the two premiers stated that from 2013 investors and bondholders would have to share the burden of any future State bailouts in the Eurozone. This declaration was a pivotal moment in the context of Irelands economic crisis as any hope of the country regaining market confidence was now all but completely scuttled. Following the announcement funds fled from the Irish Banking sector which had to be replaced by even more funding from the ECB. By late October Irish banks owed the ECB an eye watering 140 billion euro and Irish government bonds were downgraded to junk status by investment firm Moodys. In November negotiations between the Irish government and the ECB, IMF and EU formally commenced about a possible financial bailout.

It took no longer then five weeks after the Deauville declaration for Ireland to be entered in to an official Troika bailout. The bailout features were more or less the blueprint for the already published National Recovery Plan, with broadly the same targets as outlined in the Plan. 67 (Leahy, P. page 54)

The government unsuccessfully attempted to include burden sharing in the bailout, though this proposal was supported by the IMF delegation, the ECB categorically ruled out any burning of the bondholders. In summary there were two major consequences of the 2008 crisis here, one economic the other political. The loss of economic sovereignty was without doubt the greatest single economic consequence of the crash here. The subsequent political consequence of the crash came shortly after the bailout with the general election in February 2011. The political landscape was altered beyond recognition. 68 (Whelan, N. page 334)

Fianna Fail, the countrys natural party for government was all but wiped out, the party lost 51 seats of its 71 remaining TDs, returning to the 31st Dail with a mere 20 deputies. The party which had governed for 61 of the previous 79 years since it first assumed office in 1932 came quite close to virtual wipe-out. The public felt with warranted justification that the party was the most responsible for the economic crash and culpability rested with them. As a result the party paid a heavy political price. 69 (Leahy, P. page 100)

Fine Gael and Labour assumed office with its largest ever majority coalition of 113 TDs. 70 (Leahy, P. page 71)

The Fine Gael/Labour coalition government though it campaigned strongly on a platform to renegotiate the bailout in the end did not deviate from the original bailout plan. 71 (Leahy, P. page 71)

The populist rhetoric employed by both parties was evident prior to election 2011, Frankfurts way or Labours way was proudly stated by Labour leader Eamon Gilmore and Anglo Irish will not receive another red cent if we are elected by Fine Gaels Leo Varadkar. But this rhetoric before the election turned out to be just that, rhetoric. Both parties subsequently implemented in full, the terms of the programme. Was this due to a change of policy once they assumed government? Extremely unlikely. The reality was that there was simply no feasible economic alternative to the fiscal consolidation that was required in Ireland at this time.

72 (Whelan, K. page 1)

A common misconception of the Irish crisis is that the Bank bailout and subsequent recapitalisations were the source of all the countrys economic problems in this period. They no doubt played a part but most of the fiscal adjustment would have been required in the absence of any banking crisis. The political motivation and design of the bank guarantee I have no doubt will be debated in the coming years and down through the course of history, but I am strongly of the view that the governments response through prompt fiscal adjustments was the best possible option for this country at the time. What is clear however is that the primary cause of the economic crisis here was a domestically created property bubble which through lack of regulatory measures was allowed to over-heat. We will never know what might have been had the government pursued policy alternatives such as defaulting on sovereign debt or allowed a banking system collapse. Again the alternatives will be debated by many in to the future, my view put simply is that the policys that were pursued by both governments in this period were not right, nor were they wrong, but ultimately they were necessary to prevent a much greater economic catastrophe from occurring.

Bibliography:Books:OToole, F. (2009) Ship of fools How stupidity and corruption sank the Celtic Tiger. London. Faber and Faber limited.

Cooper, M. (2009). Who really runs Ireland? The story of the elite who led Ireland from bust to boom and back again. London. Penguin group

Leahy, P. (2013). The price of power, inside Irelands crisis coalition. London. Penguin group.

ORourke, M. Murphy, B. Whelan, N. (2014) Brian Lenihan in calm and crisis. Kildare. Merrion Press.

Carswell, S. (2011). Anglo Republic: inside the bank that broke Ireland. London. Penguin books.

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Academic Articles:Whelan, K. (2013). Irelands Economic Crisis: The good the bad and the ugly. UCD.

Kelly, M. (2009). Whatever happened to Ireland. UCD.

Avellaneda, S. Hardiman, N. (2010). The European context of Irelands Economic Crisis. UCD Dublin European Institute working paper 10-3.

Honohan, P. (2009). What went wrong in Ireland. Trinity College Dublin.

National Recovery Plan. (2010). Stationary Office, Dublin. Link- http://www.budget.gov.ie/The%20National%20Recovery%20Plan%202011-2014.pdf

Brian Lenihan Emergency budget 2009 speech: link- http://www.budget.gov.ie/Budgets/2009Supp/FinancialStatement.aspx