The Irish economy once the tiger of Europe seems intent on proving that dead cats don’t bounce, they just keep falling.

The problem is that although the Irish Government is theoretically solvent for the immediate future, the Irish banks are not. The Irish banks are state backed. The Irish banks owe more than the state can afford to repay.

After a decade of lending on ridiculous house building the bubble has burst. No commercial banks are lending to them and instead they are propped up by loans from the European Central Bank (“ECB”).

To quote Robert Peston’s excellent blog

“The latest published figures, which almost certainly understate the
true picture, show that the European Central Bank had lent 83bn euros to
Ireland’s domestic banks by the end of September and it had lent 130bn
euros to all Irish credit institutions at the end of October.

Or to put it another way, ECB loans to Irish financial institutions were more-or-less equivalent to the current annual value of Ireland’s
Gross National Product.

To repeat, without the financial support of the ECB, Ireland would be bust right now.”

I can remember being in county Mayo in 2004 seeing brand new houses popping up like mushrooms in a Fairy ring and being told they were going to be bought by tourists from Europe… it could have been prophetic… for it will be European taxpayers who might ultimately have to step in.