DELHI PUBLIC SCHOOL,GREATER NOIDA

ECONOMICS PROJECT

EURO ZONE
IRELAND CRISIS
–”Celtic Tiger”
The Euro Zone Financial Crisis
• Transmission from the United States
• Housing Price Bubble and Collapse
• Financial Market Freeze and Collapse
• Policy Response
– Support for Financial Sector
– Monetary Policy
– Fiscal Policy
• Effect of the Euro Currency Zone
• Greece’s Problems
Why did the Crisis Spread?
 Subprime Debt Obligations made in USA held around the
world caused global financial shock.
 Housing bubbles burst in UK , Ireland, Spain as well as US.
 Failure of Lehman Bros in September 2007 caused
massive panic over counterparty risk. AIG required $180
billion bailout to cover Credit Default Swaps, insurance
against bond defaults underwritten without reserves.
 Stress on banks around the world led to shrinking credit
availability. “Shadow” off-balance-sheet banking sector
collapsed as short-term funding vanished.
 Falling demand spread from US to all countries; as US
imports dropped, other countries’ exports fell.
European Financial Institutions under
Stress
 BNP-Paribas forced to close funds in August 2007
 UK bank Northern Rock taken over by government
 German state banks IKB, WestLB, BayernLB and
Sachsen bailed out by government
 Irish banks given government deposit guarantees
 Switzerland injects funds into UBS
 Iceland’s banks unable to roll over short term
borrowing, default on deposits of foreigners
The Role of the Euro
 Previous economic crises in Europe have led
to large devaluations of currencies.
 Within euro zone, single currency prevents
devaluation , provides automatic financial
support through capital markets.
 Non-euro currencies depreciated sharply in
2008, British pound sterling, Swedish kronor,
Polish zloty, Hungarian forint.
About Irish Economic Crisis
 Major economic crisis in Ireland that is partly
responsible for the country falling into
recession for first time since 1980s.
 Left more than 326,000 people unemployment.
 According to Ireland’s Central Statistics
Office, the nation’s GDP shrank by 7.5%
Causes of Economic Crisis
 Due to low corporate tax.
 Due to European central bank (ECB) interest rate .
Banks were giving loan for refinancing at very low
rate.
 The expansion of credit and included a property
bubble which petered out in 2007. Irish banks, already
over-exposed to the Irish property market, came under
severe pressure in September 2008 due to the global
financial crisis of 2008- 2010.
Impact of Irish Economic Crisis
 Anglo Irish Bank
Bank was exposed to the Irish property bubble. The share price was
dropped.
 Growth And Unemployment
It had severe recession in 2008.GDP was down by 7.5% and GNP
was down by 12% in 2009.
 Property Market
Residential and commercial property was slumped badly.
 Immigration
More than 65,000 people left Ireland .
Effect on Irish Stock Exchange ISEQ

 Stock index crashed from 10,000 points to

around 1,465 down ,14 years low .
Effect On Anglo Irish Bank
 Anglo Irish bank was exposed to property bubble.
 A hidden loans controversy in December 2008 led to
a further drop in its share price.
 The ISEQ dropped to a 14-year low on 24
September 2009, probably triggered by the
unexpected resignation of former Anglo Irish Bank
director, Anne Heraty from the board of the Irish
Stock Exchange
 Role Of Government
 The Irish government sought a European Union-Global Monetary
Fund bailout over the weekend, finally succumbing tο pressure from
іtѕ fellow Euro zone members аnԁ panicked fiscal markets.
 In 2008 Irish budget ,government increased the value added tax
(VAT) by half percent to 21.5%
 The budget 2009 included a new income levy for imposed on all
government workers.
 The govt . ordered ,the closure of military barracks near Northern
Ireland.

Ireland Parliament
Public Response
 The 670 employees, 480 of them were laid off from their
govt. jobs. The workers responded angrily to the unexpected
decision and revolted against the decision.
 More than 12,000 people protested against the emergency
budget 2008 on the streets of Dublin, Ireland.
 Due to the threatened return of university fees by
government , teachers and students descended in solidarity
on government buildings at Leinster House , Dublin

Irish Financial Crisis march in Dublin ,Ireland

Some Important
Statistics
Unemployment , GDP, Immigration Rate
Irish Government Finances
Comparisons with other European
Countries
Newspaper Article

ECOMOMICS TIMES DATED ON 30 DEC 2010

Our Analysis
 Irish government shouldn’t increase the taxes
(VAT) on basics commodities as US
government did .
 Government should keep a regular check on
banks giving loans to whom.
Bibliography
THANK
YOU
Made By -:
Kaveri Nanda