Ireland before and after the Crisis – Authoritative but Hazardous Structural Reforms in Financial Crisis Management

Abstract

Owing to the significant international exposure of its economy, Ireland was one of the countries suffering the greatest losses stemming from the 2007–2008 financial crisis. After a brief presentation of the nature of the subprime crisis, the study describes the economic conditions of the country before the crisis and the impact of the crisis on the Irish economy. This part of the study provides a detailed analysis of the changes triggered by the crisis in the national budget, in sovereign debt and in tax centralisation. The chapter to follow gives an insight into the economic cornerstones and instruments of the Irish contingency measures before presenting an overview of the results of the structural reforms. The study concludes that Ireland’s resolute efforts to restore the budget and to increase the flexibility of the economic structure played a key role in the success of crisis management and in conjunction, these measures resulted in regaining the confidence of the international capital market. In addition, it should not be overlooked that the country recognised the need for and did not hesitate to take recourse to external help in its crisis management. Finally, it is pointed out in the paper that today Ireland is in a position where the economy is well prepared to commence converging to the vanguard of European Union Member States. However, the Irish society will have to pay a steep price for the opportunity of this economic convergence in future, and should also reckon with a number of risk factors in this process.