Ireland's Economy
The 2008 Banking Crash and Bailout
How Ireland's property bubble burst in 2008, why the government guaranteed all bank liabilities, and how the 2010 EU-IMF bailout and austerity followed.
Ireland’s property bubble burst in 2008.
The bubble
- Banks lent heavily to property developers and homebuyers.
- House prices more than doubled from the late 1990s.
- Construction became a large share of the economy.
The guarantee
- In September 2008, the government guaranteed almost all liabilities of Irish banks.
- Bank losses turned into public debt.
Anglo Irish Bank
Anglo Irish Bank collapsed with huge losses and was nationalised.
Bailout
- By 2010, Ireland needed an EU-IMF bailout of about 85 billion euros.
- Austerity: spending cuts and tax increases.
- Unemployment rose to around 15 percent; emigration returned.
Recovery
- Ireland exited the bailout in December 2013.
- Growth returned strongly, helped by exports.
Lesson
Guaranteeing bank debts can transfer private losses to taxpayers.
The ghost estate
After the crash, unfinished housing estates stood empty across rural Ireland, called "ghost estates".
Thinking bank losses only affect bank shareholders
Ireland's guarantee turned bank losses into public debt.
Key takeaways
- Ireland's property bubble burst in 2008.
- The government guaranteed bank liabilities.
- Ireland needed an 85-billion-euro bailout in 2010.
- It exited the bailout in December 2013.
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