The Irish Exit - A Warning for Europe

The Irish bailout highlighted two major issues about the involvement of multilateral agencies in Europe: one was their desire for visible short-term solutions and second is a significant disregard of the political institutions with which they were forced to engage. The Irish case study and more importantly the Irish exit from the bailout illustrate this best. The €85bn bailout of Ireland in late 2010 was the low point economically and politically, for the Irish Republic since its foundation in 1922. The crisis was brought about by a well rehearsed combination of shortsighted policies related to banking, housing and taxation that in concert with crony capitalism brought an end to the “Celtic Tiger” years. The ability of this mixture of economic and political decisions to result in the bailout was related to the Eurozone, which facilitated bad decisions with an easy monetary policy and hot money capital inflows. The Irish crisis, when it had reached a critical point in late 2010, had the potential to undermine the entire Eurozone. As a result, a bailout package was formulated by the Troika. The Troika had already been involved in Greece and had set up a programme there. The IMF had bailed-out the Hungarian, Baltic and Icelandic economies only a few months earlier as well and had become adept at understanding the immediate needs of crisis management in Europe