A work colleague mentioned the other day that his widowed mother, ailing and elderly, was greatly worried by the state of Irish banks in these days. She wondered about withdrawing her deposits and putting the cash under her mattress. When it was put to her that the Irish government had guaranteed all deposits, she did not seem to be greatly reassured: her attitude was — but can I trust them?
Her worries are widely shared and the breakdown of trust is pervasive. Bankers, property developers, politicians, bishops have all fallen from their pedestals.
As recently as 2007 it was a different story, at least on the economic front. In that year the figures for economic growth, unemployment and inflation were 4.4 per cent, 4.6 per cent and 4.9 per cent respectively. The respective figures for 2009 were -11.3 per cent, 12 per cent and -4.5 per cent.
What has become apparent in retrospect is that, at least since about 2001, the Celtic Tiger phenomenon in Ireland changed from export-led growth to debt-financed capital spending, as cheap credit for housing led to a property and construction bubble. When credit became tight because of the global recession, the extent of Ireland's indebtedness gradually became apparent. Its economy went into recession.
Since then there have been four major attempts to bail out the banks, estimated to cost up to 60 billion euros, with a further 25 billion as a contingency fund. It is part of the loan from the international troika (International Monetary Fund/European Central Bank/European Union special fund).
In addition, as the recession hit harder and the tax take reduced, Ireland found itself running a fiscal deficit of up to 20 billion euros and has been given five years to reduce that debt to the 3 per cent ratio demanded by the Euro zone currency members.
This has led to a number of severe budgets, with more to follow in a 45 year plan. It will reduce the minimum wage and social welfare payments at a time of growing unemployment and emigration.
The international 'bailout', which the government preferred to call a loan, has all kinds of conditionalities and erosion of sovereignty built in. It was necessary because the markets were charging Ireland prohibitive rates for borrowing to