Financial Crisis of 2008

Question 1

What was the Celtic Tiger

Answer 1

• Unprecedented economic growth
• Some thought it was the era of permanent prosperity…
• Time period from late 1990s to the catastrophic economic collapse in 2008

Question 2

Phases of the Celtic Tiger?

Answer 2

• 1987–92: a growth phase, (center-right political coalition,
  fiscal crisis addressed, global economic developments, growth)
• 1992–97: a developmental phase, (center-left political
  coalition, equality, development of indigenous software sector, productive economic activity)
• 1997–2007: a competition phase, (center-right political
  coalition, reducing taxes, property development, tax subsidies around property

Question 3

Name some Aspects of the “Celtic Tiger”

Answer 3

Rise in tax revenues especially property related taxes.
Rise in government spending.
Growth in bank lending to developers and speculators.
Rising asset prices especially property related.
RTÉ Archives | Business | New Savings Scheme

Question 4

How was Ireland of the mid- 2000s?

Answer 4

• At the peak over 80k housing units built (in 2006)
• Property and related taxes
• Many houses were built in places where there was no demand and arose out of political corruption of the planning system (The Mahon Tribunal)

Question 5

Name some Financial drivers of the building boom

Answer 5

1. Low interest rates from European Central Bank made borrowing very cheap.
2. ‘Market Entrants’ to mortgage market
3. Ready supply of credit to Irish banks from cash rich EU banks

Question 6

What was Global Financial Crisis in 2008

Answer 6

• ‘Innovative’ financial products (bundling of debt products and -resold between financial institutions)
• Mortgage-Backed Securities…
• Sub-prime mortgages (concerns emerge in USA…)
• Credit Crunch (2007) – Global Impact

Question 7

Economic Boom Followed by Bust

Answer 7

Financial Crisis 2007-2008 and thereafter.
* Banking Collapse (and Bailout).
* Ireland – included ‘bailout’ of financial institutions and creation of ‘NAMA’ (National Asset Management Agency) to address ‘bad debt’ on banks’ balance sheets.
* GDP fell by 7% (in 2009 alone).
* Unemployment rose from 3% to 17%
* Wage and salary cuts for low- and middle-income households

Question 8

Bailouts that Ireland needed after the collapse of Celtic tiger

Answer 8

• Collapse of the property market led to Irish banking system collapse which was over exposed to risky speculative lending to developers.
• State bail out of Irish banks and international bondholders.
• Several tens of billions cost to Irish taxpayer
• Net cost of Irish banks bailout rises to €45.7bn, comptroller says –
  The Irish Times

Question 9

bailout situation Europe

Answer 9

• Crisis within the Eurozone
• Ireland, Italy, Portugal, Spain, Greece…
• Ireland in Dire Economic Situation (2010)
• Troika: International Monetary Fund (IMF) / European Central Bank (ECB / EC(European Commission) took over managing the Irish economy.
• ‘Austerity’ budgets…higher taxes, cutting public spending….