As Ireland emerges from the EU/IMF backed bailout that the country required to stay afloat back in 2010, this info-graphic takes an in-depth look at why the country needed the money, where it was spent, the winners and losers and asks how the country might move forward from here.
During the heady days of the Celtic Tiger from 1997-2007, Ireland’s economy roared ahead. While the early part of the boom was based on genuine enterprise, the latter part became speculation based frenzy. At one point, Irish retail rents were higher than London or Paris! Something had to give and it did! In 2008, the music stopped as the banks realised that much of the money that they had forwarded to developers was not going to be repaid. Having literally ran out of money, the directors of Anglo Irish Bank sought an emergency meeting with the Irish government. The government feared that if one bank told the world that it had run out of cash, a run on the other banks and the collapse of the financial system in Ireland was inevitable.
The ECB feared that such an event would not only drag down the Irish system but perhaps even sink the Euro as contagion to mainland Europe would be inevitable. Under immense pressure from all sides, the government took the unprecedented move to guarantee all the debts of all Irish banks. This “blanked guarantee” ultimately sank the country as the losses on the banks continued to climb as more and more developers went bust leaving billions of Euro of unpaid debt in their wake.
As with any collapse, there are not just losers but also winners. Brave VC funds bought up Irish debt on the secondary market at knockdown prices as it looked like Ireland may default on its loans. When it latterly became clear that Ireland would honour its debt, the bonds rose in value making billions for those who had made this bet!