It's become a worrying trend. Members of the EU are collapsing one by one. Ireland, also known as the Celtic Tigers because of their economic growth in the 90s, is another nation struggling for survival in today's global environment. The Irish were diving into property speculation, much like the British, Americans and us Australians. We've all been guilty of speculating in property and creating property bubbles.
As the Irish became more heavily leveraged in early 2000, housing and construction dominated the economy and almost 13% of the entire workforce was employed by the building and construction industry. Housing can be massive source of economic growth because there are so many associated industries that benefits. From real estate agents, banks, mortgage brokers, solicitors, government taxes and stamp duties to furniture, plumbing, electricians, housing whitegoods, department stores and associated retail stores as homeowners furnish their properties.
Proposed spending cuts by the Irish Government
* 10 billion euros worth of spending cuts
* 5 billion euros worth of taxes to be raised
* cutting minimum wage by 12%
* cut welfare payments by 3 billion euros
* cut 25,000 public servant jobs
Liz O'Hagan, an Australian working in Ireland was quoted saying,
Click on image to zoom in.
The vultures (ie: investors) sure are fast. With the crisis that Ireland has been mired in, buyers of bonds (investors financing the Irish government) have been quick to demand higher yields as compensation for the increased risk. According to Shawn Pogatchnik at Apnews.myway.com, the yield(interest rate) on 10-year Irish notes had increased to 8.18 percent. As it gets more expensive for the Irish government to finance their deficits, it also gets more expensive for private companies wishing to borrow to fund business because of the sovereign risk.
"I sit here every day, taking calls, reading emails and fielding inquiries from people from all walks of life who are getting ready to get out of Ireland...they've lost a job or a family member has lost a job or they're about to lose their position and simply can't afford to live off their income anymore."The Irish Government are poor at budgeting and saving for hard times
Professor Ferriter has studied Ireland and its history. She is quote in the SMH saying,
"There is the sad recognition that so much was squandered, that when you take the scale of the success of the Celtic Tiger and the scale of commercial activity then...there is such a feeling of regret that excess was not controlled and regulated. There were such opportunities for long-lasting security, now lost."Times are hard in Ireland, with unemployment rates at 13%.
Future of Ireland
* Their banks need to recapitalise- the government is trying to rescue them but needs borrowed money to do this
* The Irish Government needs to borrow approximately 100 billion euros, which will increase their sovereign debt
* The funding may be coming from the European financial stability mechanism (A fund guaranteed by EU members)
* Funding from the IMF (this usually has strings attached)
* Other loans
Foreign exposure to Ireland by bank nationality @ 31st March 2010Total foreign bank exposure(including derivatives and other credit) is 583 billion euros and this consists of the following nation's financial involvement:
* 155 billion euros - Britain
* 143 billion euros - Germany
* 79 billion euros- US
* 64 billion euros- misc Euro nations
* 60 billion euros- France
* 39 billion euros- Rest of the world
* 20 billion euros- Italy
* 16 billion euros- Japan
* 11 billion euros- Spain
Some shocking statistics