Gee, a lot of story sounds awfull "familiar", doesn't it?


Why the Irish Crisis is Going Global

Tuesday November 16, 2010, 5:49 pm EST

You may not have to worry about Ireland in a week, or a month. But at the moment, the Emerald Isle is causing global investors a whole lot o' anxiety.

On the surface, it's reminiscent of the problem Greece had with its unmanageable federal debt early this year, which shook world markets, ended a global rally in stocks and ultimately led to a $146 billion bailout by the European Union and the International Monetary Fund. Greece spent more money than it took in for years, papered over the gap, and essentially became insolvent when it could no longer borrow the money needed to finance its debt.

Ireland is on the brink of insolvency too, which has helped drive down the S&P 500 stock index by nearly 4 percent over the last few days. But unlike Greece, Ireland is a relatively wealthy country, with per capita GDP of nearly $38,000. That's 21 percent higher than per capita GDP in Greece, and in the top third for European countries. Low corporate tax rates and a skilled workforce have made Ireland a haven for some of the world's biggest companies. And its public debt, about 65 percent of GDP, is far below Greece's crushing load, which is 126 percent of GDP. Ireland's debt levels are even lower than those in France, Germany and the United Kingdom.

But Ireland has one huge problem that may soon make it a supplicant to its European brethren: A failed banking sector that Ireland's government can no longer rescue on its own. Ireland is in the midst of a real estate bust that could trump even the ruinous downturns that turned parts of southern California and Nevada into suburban ghost towns, with home-grown banks stoking it all. Now, those banks are trying to manage catastrophic losses. The Irish government has effectively nationalized the nation's biggest banks by guaranteeing their debt, which would be akin to the U.S. government taking over Citigroup, Bank of America, J.P. Morgan Chase and Wells Fargo.

That means the Irish government is also on the hook for the losses those banks endure--which have risen far beyond initial estimates, and may have a lot farther to go. So far, the Irish government is obligated to cover losses amounting to 175 percent of Irish GDP, which is becoming an unsustainable burden. "If the Irish banks go down, the Irish government also goes down," says economist Jacob Kirkegaard of the Peterson Institute for International Economics.

As estimates of Irish bank losses have gone up, pressure has mounted on Ireland to do something decisive--and panicky markets may now force a solution. Ireland wants the European Central Bank to continue lending money to Irish banks at low interest rates, but the ECB has different ideas. Inflation has been creeping up in Europe, and the central bank said recently that it wants to end its program of pumping liquidity into banks, not continue or expand it. Cutting off those loans to Irish banks could force defaults, which the Irish government would have to cover or essentially be in default itself. Germany, meanwhile, wants to hurry a bailout of Ireland, to prevent worries about sovereign bonds from spreading to Portugual or Spain, which would be a much bigger problem.

Here's the link the rest of the story:

http://finance.yahoo.com/news/Why-the-Irish-Crisis-is-Going-usnews-4028366968.html?x=0

What was that old daytime TV drama....As the world turns.

Quote from: walkstall on November 17, 2010, 07:11:09 AM
What was that old daytime TV drama....As the world turns.

  You watched that ???

    Can someone tell me why all these countries have gotten into financial trouble all at once...I mean any country can get into difficulty but all at once ?

Quote from: zip on November 19, 2010, 01:22:51 PM
  You watched that ???

    Can someone tell me why all these countries have gotten into financial trouble all at once...I mean any country can get into difficulty but all at once ?

When America sneezes, the rest of the World catches a cold.

Problem is, we have the flu, and the rest of Europe has pneumonia.

Quote from: zip on November 19, 2010, 01:22:51 PM
Can someone tell me why all these countries have gotten into financial trouble all at once...I mean any country can get into difficulty but all at once ?

The grand European socialist experiment has failed miserably.  It's that simple.  This is only the beginning.  Stay tuned...................