The Irish Economy

Since I last wrote several significant developments have taken place making it clear that the present crisis both in Ireland and in Europe is much deeper that initially realised. Indeed there is an even growing risk now that the whole financial system - not just in Ireland - but in the Eurozone generally could spiral out of control with disastrous consequences for its citizens. And unfortunately this risk is aggravated through a lack of effective action at the EU level (where intervention is most necessary). To be honest I was deeply shocked at the manner in which the EU reacted to the growing Irish problems last week. Though I have been a persistent critic of the terrible mismanagement of our economy (especially since 2000) at least I could not fault the Government for its determination to play by European rules. So for example, despite considerable domestic criticism, Brian Lenihan consistently maintained the Government's intention to fully redeem all senior bondholders in o

Things are not looking good at present in Ireland with an enforced economic bailout from the EU/IMF Stability Facility in the new year looking ever more likely. Unfortunately the damage already done to the economy during the totally reckless latter phases of the Celtic Tiger has been so great that in truth it is hard to see how any credible response can now be made to deal with the financial implications. As I had always feared, losses from the banking system have been much greater than recognised. Indeed I suspected that the government was engaging in an unconvincing game of bluff in hiding the extent of such losses. From an initial position that the banks "would cost us nothing" it is now admitted that the losses will be in the order of €50 bl. (which unfortunately is likely to be a severe underestimate). The projections with respect to property prices on which these figures were made were far too optimistic. Furthermore there is a considerable amount of - yet - unreco