Debt and austerity: Post-crisis lessons from Ireland

Patrick Honohan

Journal of Financial Stability, 2016, vol. 24, issue C, 149-157

Abstract: The Irish economy's heavy pre-crisis dependence on a credit-fuelled property price and construction bubble meant that it suffered more financial instability than most countries in the downturn 2008–2012 with the failure of the bulk of the banking system, heavy official and private debt and a severe employment decline. Faced with a sudden stop of international market funding, the Irish government had recourse to an EU-IMF financial support programme at the end of 2010. Reviewing the broad parameters of the programme this paper argues that, while a sharp fiscal adjustment was necessary, adverse distributional consequences were partly mitigated by government. But the programme should have embodied better international risk-sharing through financial engineering. Ireland's experience in financial crisis management and crisis resolution points to the importance of building and maintaining trust.

Keywords: Financial crisis management; Ireland; EU-IMF programme (search for similar items in EconPapers)
JEL-codes: E32 E63 E65 G18 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:24:y:2016:i:c:p:149-157

DOI: 10.1016/j.jfs.2016.03.002

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