The crisis stemmed from a combination of macroeconomic developments, risky bank
practices and unsustainable fiscal policies. From the early 2000s, economic growth became domestically focused. Following the adoption of the euro, the size of the banking sector grew significantly and became increasingly reliant on property-related lending in Ireland and abroad. This expansion was increasingly funded by cheap, abundant but short-term international wholesale funding. Fiscal policy was largely procyclical, with structural deficits only closed by transient transactions taxes. The growing imbalances in
the domestic economy led to an asset price bubble with ever increasing property prices, encouraged by tax incentives and accommodative prudential oversight. As banks chased market share, lending practices and loan documentation and monitoring deteriorated. The Great Financial Crisis (GFC) that started in 2007 exposed the fragilities in the Irish system and a significant collapse in the property sector ensued. This resulted in a deep financial crisis, impacting the whole banking sector and in turn the Irish sovereign.

You May Also Like