The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis

Paperback | August 10, 2014

byDonal Donovan, Antoin E. Murphy

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By 2000, Ireland had achieved a remarkable macroeconomic performance producing 10% economic growth, a budget surplus, and a very low debt to GDP ratio. Emigration had disappeared and there was significant immigration from Eastern Europe. By November 2010, economic growth was significantlynegative, the budget deficit was out of control and the debt to GDP ratio had risen to over 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 produced a fourth crisis, the massivefinancial crisis of 2010. Against the backdrop of the newly created Eurozone, the book demonstrates the way in which a housing boom was transformed into a property market bubble through excessive credit creation. Accompanying the property market bubble buoyant property related taxes enabled aprofligate government to over spend and under tax. Few, both 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), economists, the media, and a property driven populace during the various unfolding stages of the downfall of the Celtic Tiger. It pays particularattention to the decisions to provide a highly controversial comprehensive guarantee for the covered Irish banks and the events that left the government with no alternative but to request a bail out. It considers throughout two questions: who or what was responsible for what happened and in whatsense? Could 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 and discusses the impact of measures to help resolve the current Euro debt crisis as well as the underlying lessons to be learned from thistraumatic period in Ireland's economic and financial history.

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By 2000, Ireland had achieved a remarkable macroeconomic performance producing 10% economic growth, a budget surplus, and a very low debt to GDP ratio. Emigration had disappeared and there was significant immigration from Eastern Europe. By November 2010, economic growth was significantlynegative, the budget deficit was out of control ...

Donal Donovan is a Member of the Irish Fiscal Advisory Council, Adjunct Professor at the University of Limerick, and Visiting Lecturer at Trinity College Dublin. He is a former deputy director at the International Monetary Fund with considerable experience in the area of financial crises. He has advised in the preparation of two major ...

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Format:PaperbackDimensions:352 pagesPublished:August 10, 2014Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0198719965

ISBN - 13:9780198719960

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Table of Contents

Preface to the Paperback EditionPrefaceIntroduction- The Irish Financial WakePart I: Background1. The Rise of the Celtic Tiger2. Ideology and Financial Innovation3. Asset Market Bubbles and Financial CrisesPart II: The Causes of the Crisis4. The Banks and the Property Market Bubble5. The Failure of Financial Regulation6. The Makings of a Fiscal Crisis7. The Property-based Revenue Book and the Accompanying Expenditure Surge8. The Climate of Public Opinion - Politicians, Economists, and the MediaPart III: The Crash9. The Storm Clouds Gather10. The Guarantee Decision of 29 September 200811. From the Guarantee to the Bail OutPart IV: After the Crash12. Coping with the Future13. ConclusionsAppendix A: The Views of the IMF and the OECD in the Period Leading Up to Ireland's Financial CrisisAppendix B: Interview with the Governor of the Central Bank of Ireland, 18 November 2010Appendix C: IMF Assistance to Ireland- A Hypothetical Scenario

Editorial Reviews

"An excellent guide to the demise of the Celtic Tiger." --The Financial Times