ireland financial crisis
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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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