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Introductions

Financial Crisis

It is a situation in which the value of financial institutions orassets drops rapidly.

Investors sell off assets or withdraw money from savings

accounts

Debt Crisis The heavy borrowing of many newly industrializing countries

that resulted in a prolonged financial crisis

Debtor nations might not be able to continue makingpayments on their loans.

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IRELAND

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Background Information

Geography

Ireland is an island to the north-west ofcontinental Europe. It is the third-largest island inEurope and the twentieth-largest island on Earth.

Politics

Divided between Republic of Ireland (Dublin) andNorthern Ireland (Belfast)

Population

6.4mill (Being 4.6mill in ROI and 1.8mill in NI)

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Background Information

Currency

Until 2002, the Irish use Irish pound By Jan 1999, pound was succeeded by euro

StockExchange

Irish Stock Exchange Merged with Britain in 1973 - International Stock Exchange of Great Britain and

Ireland (now called the London Stock Exchange) Operates 3 markets Main Securities Market (MSM), Enterprise Securities

Market (ESM) and Global Exchange Market (GEM)

Economy

Agriculture Industry and Service Sector Services, Trades and HighTech Industry

Irelands economy has made the transition very effectively as it has beenhelped by Foreign Direct Investments and the real estate market

In the past, Irish practice economic nationalism without much success

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Ireland Economic Timeline

1920s 1930s

Have high trade barriers such as high tariffs, importsubstitution policy

Economic War with Britain

1950 Suffers economic inactivity due to mass emigrations Marked that economic nationalism is unsustainable

19872000

Early 1987 Economy start to improve 1990s Substantial economic growth (Celtic Tiger)

2000 Become sixth richest country in terms of GDP/capita

2008 -Present

Financial Crisis

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Causes of Ireland Financial Crisis

Celtic TigerYears

(1995 2008)

PropertyBubble

(2000 2006)

GlobalFinancial Crisis

(2007 2008)

Irish Banking

Crisis(2008 2013)

Irish Financial

Crisis(2008 2013)

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Celtic Tiger Years (1995 2008)

Period of rapid economic growth

Transform from poorer country to wealthiest

Low corporate tax attracts multinational investment

Led to expansion of credit and property bubble

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Property Bubble (2000 2006)

Construction activity grew stronger

Main contributor towards the country incomes

FI increased lending for property more than other areas

FI made external borrowing to provide property loan

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Irish Banking Crisis (2008 2013)

Irish banks borrow from abroad for the property marketinvestment

GFC freeze the world interbank market

Lead to liquidity problem no money to borrow

Solvency problem as no money can be provide for new

property deals

Value of assets decline with property market and liabilityvalue greater

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Irish Financial Crisis (2008 2013)

Demand for residential property decreases

Price of the property market drops abruptly

Surplus national budget go deficit of 32% GDP

Yields of Government debt increased rapidly

Assistance from EU & IMF of 67.5 billion

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Impact of Financial Crisis to Country

Anglo Irish Bank

Hidden 87 millions internal loan to executives

Further loans between 2 banks over extended 8 years period

Considered as Irelands version of Enron

Growth & Unemployment

Severe decline in countrys GDP & GNP

High increase in unemployment

Lead economy to fall into recession

Property Market

House price falls drastically

Property price crash hit Ireland

More than the entire gain in Celtic Years erased

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How Ireland avoid debt crisis

Ireland protects theircountry from debt crisis

by control inflation

inflation in the countryto join EMU must not behigher than 1.5 percent

compared to the averageinflation rate

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How Ireland avoid debt crisis

budget deficit in the country must not exceed 3%of gross domestic product (GDP) of a country.

public debt mustnot exceed 60%

of gross

domesticproduct (GDP)

Interest rates notmore than 2%

points comparedto the interest

rate countries inthe EuropeanUnion.

Euro areaspermanent

rescue fund takestakes in the

Irish banks thatremainoperational

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