Yearbook 2010
Ireland. The crisis in the Irish banking system
intensified during the year and the government had to
postpone several times to keep the banks alive. The most
vulnerable was Anglo Irish Bank (AIB), which in December
2008 had been taken over by the state and whose shares were
now falling rapidly. This is despite the fact that a new
authority, NAMA (National Asset Management Agency), has
taken over the responsibility for many of the banks' bad
loans. Slight growth in the economy was reported during the
first quarter, but then GDP again decreased.
In the beginning of the summer came an initial official
report on the crisis, which stated that it was mainly caused
by the banks' over-generous lending to risky projects in the
property market, which had been undermined by the government
introducing tax relief for construction projects. It was
further found that economic growth during the 2000s was
largely due to the boom in the construction sector, which
was not sustainable in the long run. When property prices,
which had risen in record speed for many years, fell by more
than a third during the first ten months of the year, the
banking crisis worsened. In the first six months of the year
alone, Anglo Irish Bank made a loss of EUR 8 billion, and
the state again entered with more capital. Finance Minister
Brian Lenihan said in early autumn that the banking crisis
would cost the Irish taxpayers over EUR 30 billion in total.
Government debt, which had been down to 25 per cent of GDP
three years earlier, now rose to over 100 per cent. The
government's attempt to curb the crisis through increasingly
tough savings in the state budget was unsuccessful, largely
due to rising prices for Irish government securities. The
deficit in the state budget was projected to rise to over 30
per cent of GDP - if the costs of the banking crisis were
included. The Irish banks became increasingly dependent on
short-term loans from the European Central Bank (ECB) to
obtain new capital.
Other euro area countries were pushing for Ireland to
seek assistance from EU support funds and the International
Monetary Fund (IMF), which Greece was forced to do earlier
in the year. The Irish government denied for the longest
time that the country needed outside help. After several
trips, they were forced to ask for help. At the end of
November, the EU, IMF and Ireland agreed on a rescue package
in which Ireland could borrow EUR 85 billion at around six
per cent interest. In exchange, Ireland would make further
tough savings in the state budget. At least 25,000 jobs were
expected to disappear from the public sector.
According to
COUNTRYAAH, the government was previously unpopular, but now
dissatisfaction grew. In Dublin, up to 100,000 people
gathered to mark their dissatisfaction with austerity
policy. What particularly aroused anger was what was seen as
the politicians 'attempts to bring the residents behind the
light and that it was Irish taxpayers who would have to pay
for the government and banks' mistakes. More and more
questioned Prime Minister Brian Cowen's leadership and the
opinion figures of the largest Fianna Fáil government party
dropped. Cowen also lost support within his own party. It
also became clear that the work of the government coalition
was cracking down. The Green Party said it wished to have a
parliamentary election in January 2011 after Parliament had
taken its position on the budget.
Its first part, which included, among other things, even
more tax increases, new pay cuts for civil servants and
deterioration of welfare systems, was approved on December
7. However, the government refused to raise the low
corporate tax rate to 12.5 percent.
The government forced Allied Irish Banks to announce
plans to pay out EUR 40 million in bonuses to some of its
top executives. At the end of December, the state took over
the debt-laden bank with the help of money from the
country's pension funds. It thus became the fourth Irish
bank nationalized.
Gradually it looked as if the parliamentary elections
would be held as early as March 2011. Fianna Fáil was
reported to have had the Green Party agree to a postponement
by promising that new climate legislation would be adopted
before the election.
Many Irish people, especially young and well-educated
people, left the country to work abroad. It was estimated
that around 100,000 Irish people would leave during the
year. But there were also examples of companies that went
well, most of them foreign-owned IT companies. These
companies could have lowered their costs for real estate and
labor while benefiting from the low exchange rate for the
euro.
The revelations about pedophile scandals within the
Catholic Church in Ireland continued to attract attention
during the year. In March, Pope Bishop John Magee approved
the dismissal application. He was one of the high-ranking
church leaders who, in the so-called Murphy Commission
Report of 2009, was accused of darkening the abuses
committed by priests and others within the church during the
years 1975–2004. Later that month, the Pope apologized to
the victims. In May, he ordered a papal visitation of the
Irish Catholic Church, where one would find out how the
church leadership acted but also enter into a dialogue with
organizations representing the victims and their families.
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