I remember reading a few years ago that Ireland had revolutionized its economy and was one of the fastest, if not the fastest, growing economies in Europe. Now they need a bailout and their debt is 1/3 the size of their economy. Where did they go wrong? Was the housing bubble and the derivatives market not only a US problem but a problem that was occurring in the rest of the world as well?
Ireland 'in preliminary talks with EU on bailout'
The Republic of Ireland is in preliminary talks with EU officials for financial support, the BBC has learned. It is now no longer a matter of whether but when the Irish government formally approaches the European Financial Stability Fund (EFSF) for a bailout. The provisional estimate for EFSF loans is believed to lie between 60bn and 80bn euros ($82-110bn; Ģ51-68bn).
Since 2008, Ireland has suffered the worst property collapse of all developed economies, with house values falling between 50% and 60%. Our correspondent says the Irish government has also all but nationalised the country's banking system, which had lent recklessly at an estimated cost of 40bn to 50bn euros.
The country has promised the EU it will bring its underlying deficit down from 12% of economic output to 3% by 2014. Its current deficit is an unprecedented 32% of gross domestic product, if the one-off cost of bad debts in the Irish banking system is included. The Irish government, which has a flimsy majority in parliament, is set to publish another draconian budget on 7 December, which will make spending cuts or tax rises totalling 6bn euros, and aims to bring the deficit down to between 9.5-9.75% next year, he adds.