The Irish Financial Crisis Was Both Predictable and Preventable. to What Extent Do You Agree with This Statement?

1113 Words Aug 8th, 2013 5 Pages
Irish Financial Crisis has attracted much attention recently. Driven by booms in property and lending, it left the society with massive issues such as high unemployment, insolvent banks and huge government deficit(Kelly, 2010, P1). There are many debate surrounding on whether the crisis could be predicted and prevented. This essay will attempt to demonstrate that Irish Financial Crisis was both predictable and preventable. It will first state that Irish Financial Crisis was predictable through the observation of its abnormal economic growth mode and the soared property prices. Then it will turn to argue that the crisis was preventable. This essay will try to analyse theoretical and practical facts were provided as experience to prevent the …show more content…
The whole country was drunk on the cheap credit, courtesy of the euro. It was an absurdly low interest rate for Ireland, which could have done with rates of eight per cent or even nine per cent (Heath, 2010). Thus, it is obviously that the accelerating model of Irish economy growth was abnormal and all previous experience told people that all the abnormal climbing economies would led to economic bubbles, such as the US and lceland( Kelly, 2006).

Furthermore, what people can predict through the observation of interrelationship between the soared property prices and the crisis. The dramatic growth of GNP greatly related to bank lending, low interest rates and relaxed lending criteria led to a housing boom (Kelly, 2006). According to Kelly (2010, P10) the rapid expansion of bank lending led predictably to rises in the prices of Irish houses and commercial property. For instance, people were able to borrow hundreds of millions from different banks with low interest rates and even without posting collateral; people queuing overnight to buy houses in new developments; builders increasing prices by a few thousands a week; people paying a down payment of $5,000 on a house and selling it on for a $100,000 profit a few weeks later (Kelly, 2006). “Like any bubble, the rise of Irish property prices contained the seeds of its own collapse” (Kelly, 2010, P3). Just as

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