The euro crisis and crisis management: big lessons from a small island

Abstract

Following an overview of the economics of the current financial crisis, and the phenomenon of the Irish ‘Celtic Tiger’, this article argues that the current Irish-crisis and purported Euro-crisis are specific examples of the failure of banks internationally to exercise appropriate prudential care when making loans to both individuals and governments. The policy issue is thus one of banking supervision rather than the exclusion, or otherwise, of crisis nations from the Euro-zone. Thus international banks which uncritically purchased bonds from reckless banks and profligate governments must share the adjustment costs associated with the current crisis.