Literature Review The Financial crisis 2008-2010 has created a whole new genre of books and articles

devoted to exploring the causes and solutions to the recession Ireland finds itself in. The Irish commentators on the financial crisis focus on what is special about the Irish crisis compared to what happened worldwide. These commentators point to a number of factors that they believe cause the crisis. The most common cause referred to is that Fianna Fail refused cool down the property sector but rather they encouraged it. Some commentators go on to blame lack of European regulation for the crisis. These would see membership of the Euro, under the current regulatory regime, as one of the root causes. The closeness of Fianna Fail to bankers and property developers is seen as unhealthy. The wisdom of guaranteeing all bank liabilities is questioned to such an extent that there is a consensus against the bailout. David McWilliams writes books on economics for a popular audience. Follow the Money was one the first books published about the crisis in 2009. Similar to The Bankers by Shane Ross and Who really runs Ireland by Matt Cooper McWilliams places the blame on corruption. Politicians and Business people were too close to each other. So when the Banks came to the government at the end of September 2008 the politicians helped the bankers. These authors completely disbelieve the government account that the banks had to be given state aid because if they weren t economic disaster would ensue. According to McWilliams, Ross etc the bailout was done completely for the benefit of the bankers. They see the bailout as corruption of capitalism because it means giving state aid to failed enterprises. McWilliams calls for Ireland s withdrawal from the Euro. This controversial because many believe that it would inflict tremendous damage on the economy and would damage Ireland s relationship with the EU. Shane Ross was against Euro membership but he doesn t call for withdrawal. Membership of the euro meant that we no longer had control of interest rates. Low interest rates suitable for Germany were not suited to Ireland whose economy was overheating. Europe failed in duty to regulate the Euro members. European officials respond that there were things Ireland could have done to cool down it s economy by taxing the property industry more. Most authors say that political reform is necessary. The lack of national politicians we are told is the problem. Fintan O Toole in his book the Enough is Enough calls for Mixed Member Proportional representation. This would provide national and local representatives at the same time. The national political would ideally legislate in the countries interest and would not be driven by the local concerns. Some political parties are promising to abolish the seanad but this in turn has been derided by Political Scientists are populism.

Interview with Brian Cowen. When Fianna Fail returned to government in 1997 you inherited a booming economy. Would you accept now that Fianna Fail did nothing to cause and did a lot to destroy prosperity? In the first year of the new Millennium the Irish state was experiencing extraordinary levels of growth. Employment was to 4% practically full employment. The exchequer was over flowing with money. Fianna Fail and the Progressive Democrats started spending. Do you now believe that government spending at the time was wise? Fianna Fail took Ireland into the Euro. Do you have any regrets about this There were voices that argued against this at the time. Did you give sufficient consideration to these arguments? Fianna Fail signed away one the key powers that could have cooled an over heating economy. Did you realise the difficulties that would entail? It s true that the EU envisioned other economic controls. But we did not change our policies for the new situation. Would you accept that? During the height of the boom you continued giving property based tax reliefs to builders. Do you now agree that this was a catastrophic mistake. Would you agree that the government that you were a part of was careless? Observers have remarked that in your tenure as Finance minister you never once when to ERSI for any kind of discussion. Could we fairly accuse you of complacency? One of the defining features of Fianna Fail during the Boom years was the Galway tent. For many people in the media this was blatant cronyism. You abolished the Galway tent. Did you ever take Bertie Ahern aside and say this wasn t on? Charlie McCreevey said one stage that if he had it (money) he would spend it. In the midst of a massive boom he increased spending with no thought for the rainy day. Shouldn t the Fianna Fail have saved money in the boom in order to spend it in the inevitable recession? Would you agree that the government you were part of was in the grip of hubris. You really did believe that a downturn was impossible. What made your government so arrogant? It was revealed recently that you played a game of golf with Sean Fitzpatrick in the summer prior to the bank bailout. Do you continue to argue that business matters weren t discussed on that day?

The extent of the banking bailout has been criticised. Would you do the same again if the situation arose? Other European governments were shocked that Ireland unilaterally guaranteed all bank liabilities. Shouldn t you have consulted with European partners before taking this action? Do you still believe that Anglo-Irish bank was of systemic importance? You and your ministers have often blamed the global economic recession. But you allowed the property market to become over valued. Surely you should take some of the blame?

Evaluation of sources I located Fintan O Toole s Enough is Enough because I heard it discussed on the radio. It is a journalist source but one from the quality end of the spectrum. Fintan O Tools is a columnist for the Irish Times. He has been commenting on a Irish affairs for over 20 years. He doesn t claim any specific qualification. But he has observed Irish political life as a reporter for the Irish Times. The information was published in late 2010. The publisher Faber and Faber is mainly reputed for publishing poetry. The book argues for expanded public services and is against the influence of business on public life. It argues against the influence of the Catholic Church on education. The author is culturally and politically on the center left. The book has bibliography. The book has not been been peer reviewed. The book is highbrow end of the scale. It is different from other books because it forces on wider society. Its proposals for political reform are similar to those of political scientists. Many political parties have a policy of reforming the electoral system by introducing some form of list system. Most parties are for abolishing the Senate. O Toole recommends reforming the senate. I located Europe s shoddy attempt to vilify Ireland through Twitter. It is blog article on the Daily Telegraph website. The author is the international Business editor of the Telegraph. His qualifications are that he has been covering politics and economics for decades. The information was published in January 2011 in the United Kingdom. The Daily Telegraph has reputation as a conservative paper. The source manifests a political bias against the EU. The EU s actions are described as shoddy. The article makes much of the Commissioner s former Maoism. It is implied that this is a bad thing. The source being an article doesn t contain a bibliography. As it is a post on his personal blog I do not think was reviewed. The article reflects the standard opinion of the conservative British press towards Ireland s financial crisis and the EU s role in that crisis. What went wrong in Ireland? is a scholarly note that attempts to explain the causes of the Irish Financial crisis. It often mentioned in the media and by politicians. Patrick Honohan is professional economist with experience of central banking and university teaching. The article was published in 2009. It was prepared for the World Bank. The article is economic analysis by a professional economist. The source does not show any cultural or political bias. The source was prepared for the World Bank so it would have the approval of that organisation. The article has an authority that other sources do not have. Prof Honahan is now the governor of the central bank. He has expertise the other sources do not have.

Mind Map of What went wrong with Ireland. Introduction  Emergent from Unemployment, High Taxes Emigration, Astonishing growth 1994-2000, Agricultural employment fell Severe collapse  GDP fell by 2% 2008 Twin crisis   Banking sector, Public finances,  Negative Credit availability, Rising Taxes What went wrong   Hubris   EMU membership   False security Exposure to world market   Vertical integration with multi-nation Sharp decline in stirling   Domestic retail exposed, Three reasons Ireland was badly effected   A home grown banking crisis   Loss of competitiveness   Tax structure dependent on boom continuing Two distinct growth phases   True Celtic tiger up to 2000   Government spending restraint   Social partnership successful punt devaluation  EU structural funds Second growth phase   Growth continued. But the source shifted.   Property and construction boom.   Wage restraint for income tax consessions were supported by construction revenue.   Competitiveness was eroded. Poorly positioned for the global crash   International pressures exacerbated by tax collapse   Collapse of property bubble exacerbated effects of worldwide crisis on Irish banks. Fiscal Problems   Collapse of Tax Revenues in 2008-09   Caused by move to cyclically sensitive taxes Social Partnership. Wage restraint bought by income tax reduction.   Government was exposed to a downturn   Policy makers lulled into a false sense of security   International trend towards tax reductions

Total Tax revenues fell by 14%  Cyclically sensitive taxes fell at 36% Property Bubble   Competitive pressure on Banks  Banks eased loan conditions   Two Thirds of loans in excess of 90%   Undue reliance on banks internal risk models   Hugh foreign bank borrowings 60% of GDP Global crisis  Confidence dried up   Anglo Irish was unable to secure funding   Fearing contagion Government decided against wind up and went for systematic bank guarantee   Budgetary cost put Irish government bonds under pressure NAMA   Acquire banks development property portfolio of banks Loss of wage competitiveness   From 1986 to 2000 wage restraint helped generate and sustain an era of full employment   After 2000 wage competitiveness deteriorated. Employment sustained by construction sector   Public sector wages increased relative to private sector employment. The subtle role of EMU membership   Things went wrong around the time of EMU membership. Casual factor or a coincidence   Low interest rates and removal exchange rate risk facilitated the boom.   Insensitivity of the exchange rate and interest rates to developments removed external constraint.  Real interest rates were minus 1% 1998-2007 compared to 7% in ERM period   Currency risk was removed. Banks were able to borrow heavily from abroad. Risks were unnoticed by analysts.   Policy antennae were not re tuned to take EMU membership into account. Concluding remarks: Lessons  Due to hubris policy makers neglected to ensue wages didn t go out of line internationally.   Recovery will depend on lowering cost of public services, retaining labour market flexibility and international wage competitiveness   Return to policy of the 1990s. Growth will be down 10% on pre crash predictions. Government must be decisive in correcting public finances

Bibliography Fintan O Toole, Enough is Enough: how to build a new republic (London, Faber and Faber, 2010) David McWilliams, Follow the money (Dublin, Gill & Macmillian, 2009) Patrick Honohan What went wrong in Ireland accessed 7 February 2011 2.webloc Ambrose Evans-Pritchard Europe s soddy attempt to vilify Ireland accessed 7 February 2011 published 21 January 2011 2.webloc