Dublin: Ireland is a country in the middle of a major stress test and heading for a possible breakdown.
The term stress test is used very widely here this week, because it refers to what the banks underwent as a result of their spending splurge in good times.
Bad loans cascaded from all quarters and the end result was a banking system that now has to start from scratch, essentially nationalized this week by the government.
The finance minister, Michael Noonan, described the days the bank went broke as the worst since the Irish civil war in 1921 and he is right.
The final number ends up at close to $100 billion that needs to be repaid by the banks after the previous government foolishly assumed all that banking debt on behalf of the Irish taxpayer.
What is beyond irritating however, are the actions of the big European countries that helped land Ireland in this mess.
The $100 billion that Ireland now must repay in order to get its banking system back was in large part loaned by European banks, especially in Germany and France.
Desperate to loan out cash and unable to do in their own countries, they lent billions at ridiculously cheap rates to Irish banks, around .15 per cent. The Irish banks then relent at 2 to 3 per cent to the big property developers.
All was going swimmingly until the housing bubble burst and the developers could now longer repay their loans.
The reasons the Germans, in particular, loaned billions to Ireland was because their own banking systems did not allow such reckless gambling on property as Ireland did.
Ireland became the dumping ground for easy cash, flim flam men and reckless bankers shoveling cash out the door to ludicrous development projects such as the ghost estates that now dot the Irish landscape.
Call the Irish stupid and they certainly were, but Germany, France and Britainto a lesser extent certainly helped feed the alcoholic much more drink with top up loans whenever the opportunity arose.
Now they Germans and French in particular have adopted a hectoring tone and told Ireland to behave and pay back all the bad loans.
All very well, but you are saddling a country with $100 million in debt which everyone knows it simply cannot repay.
The German and French who lent much of it to Irish banks will not hear of any alternative however, but to squeeze one of Europe’s smallest economies to the point where it squeals for mercy.
It s a little like when the bully has raided your piggy bank and taken everything but now insists on smashing it up as well.
The new government came in threatening to hold bondholders such as the German banks equally responsible for the mess.
This week they backed down in a hurry with the bondholders, those who gambled on the Irish property market, emerging untouched and the penniless Irish taxpayer left holding the bag.
There is justifiable anger here in Ireland over that and it appears that the Europeans have kept the hammer on Ireland in order to protect their own banks which hold many of the same dubious loans that Irish banks did before the crash.
If Ireland were too tell them to take a hike it is quite likely the whole European financial system would be dramatically under mined with bank forced to consider what loans are on their books.
The Germans and French would do well to pay close attention to Ireland’s needs at this point and stop their bullying tactics.
The Celtic Tiger may be gone, but it is cornered, not dead. A cornered tiger is a dangerous animal indeed.
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