When the financial crisis reached Ireland’s banks, their liquidity rapidly dried up, leaving them at an immediate risk of failure. The government was forced to step in and guarantee the banks’ debts. That put a great strain on Ireland’s finances in turn, with Greece’s financial problems making matters worse. As a result, Ireland suffered from a long-term problem of bad loans.
Key learning objectives:
Explain why Ireland’s banks suffered a liquidity crisis
Describe how the Irish government was itself caught up in the crisis
Explain the consequences of the Irish bank guarantee