of the European Union average.
Ireland turned to a country which was attracting more immigrants from Eastern Europe than for example Germany, because of its outstanding economical situation.
4In February 2001, the EU Ministers of Finance admonished Ireland. They were anxious because of speed the Irish economy was growing. The Inflation was around 5.6% in 2001, in 2002 the rate was 4.7%, this endangered the price stability of the other European nations.
A study by the EU, comparing all European regions, ranked [5] Dublin as No 2 and seven other Irish regions under the Top 20 for Europeans most valuable and attractive regions. Dublin's Grafton Street advanced to the 8th expensive shopping street in the world.
2. 3) Ireland's sins
A fundamental problem was the staffing for the head of the central bank. Traditionally a politician of the Ministry of Finance got the job. Most of the times, expertise was not a criteria. The predecessor of the present chief, Patrick Honohan, was an attorney, his predecessor studied classic philologya€|
The two main reasons for the Irish financial crisis were the excessive investments in real estate and the heavily export orientated industry. Both areas suffered from international developments which led to huge problems for the banks. The government had to rescue the banks, which resulted in a colossal national budget deficit.
The deregulation of the financial market misled the banks to grant risky but high earnings promising credits. [6] In 2009 75% of all given credits were granted for real estate projects. Those credits were a‚¬420 billion worth, 2.5 times more value than the Irish economy. In 2006, 90.000 homes were built in Ireland, in comparison to that number, Great Britain built 180.000 homes, but GB has 15 times more residents than Ireland. Banks offered mortgages to their clients, up to 10 times of their annual income without asking for any guarantees. This led to exploding costs for real estate. As an example I want to mention that in 2001 a 45mÂ2 apartment in Dublin was sold for a‚¬400.000.
After the housing bubble exploded, nobody was able to pay the rates and the banks got cash flow problems.
As already mentioned, the Irish industry was very export orientated. The fear of a possible recession in the US and in GB, the strong exchange rate for the EURO and higher production- and labour- costs harmed Ireland's competitive capability. Following those facts, Ireland had to handle an explicit stock market meltdown which affected the banks in a negative way, as well.
2. 4) Economic consequences of the mismanagement
Thereby that 32% of the Irish economy is out of the financial sector, the government had to undertake huge efforts to save it. Dublin slipped into the debt spiral after rescuing the financial sector with a‚¬49 billion, most of the money had to be spent to keep the Anglo Irish Bank alive. In 2009, Ireland faced a national debt of a‚¬104.6 billion which corresponded approximately 65.5% of the GDP. For 2010 analysts expect a budget deficit of 32%, according to the Maastricht Treaties only 3% are allowed.
2. 5) Political consequences of the mismanagement
Even while facing the meltdown of the financial sector and the economy, the Irish government refused to ask the EU for financial help. This had several reasons. Looking at Ireland'
