Prospects for Irish macroeconomic recovery and stability

Most accounts of Ireland's recent financial and budget crises focus on the failure and questionable practices of banks, the decision by the Irish government to guarantee the debt accumulated by the Irish banks, and the subsequent financial collapse that occurred as international creditors recognised the grave difficulties that Ireland faced in repaying its debt. Our analysis puts the challenges resulting from these events into a larger historical and political context. We contend that the problems Ireland is confronting are best understood as a property bubble, accompanied by regulatory lapses and structural problems in public finance. With respect to problems created by the collapse of the Celtic Tiger, we argue that export-oriented growth, though not a panacea, continues to provide the opportunity for Ireland to grow its economy despite a massive debt and the need for international support for financing this debt.