The South African Civil Society Information Service

Just How Did the Irish Miracle Turn into the Irish Nightmare?

2 Dec 2010

Over the weekend, in Ireland thousands of people protested against austerity measures and against bearing the burden of the Irish crisis. Ireland's austerity program involves raising the sales tax or VAT to 23%. At the same time corporate tax is pegged at 12,5% and will not be raised.

Just how did the Irish miracle turn into the Irish nightmare?

Professor Leo Panitch at York University says Ireland arrived at this mess via the bust of the financial sector that Ireland didn't cause. It is an American made crisis.

When the financial boom ended in the United States, The result was a knock on effect which virtually bankrupted Irish banks.

One of the first places in the world, where the impact of the financial crisis was felt, apart from Iceland, was Ireland and the Irish government immediately guaranteed all bank deposits.

"And insofar as they did so, they socialized - took onto the public shoulders - the private debt of the banks, and you see the consequences," says Panitch.

Ireland did not have a large public sector deficit, but it now does by virtue of having taken on the debt of the private sector banking deficit.

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