The past week has seen the disgrace of banking in Ireland, and through that the disgrace of the country in international financial eyes. The cost of insuring Irish government bonds against default reached 3.5 percent last Friday; even Italian debt can be insured for 1.5 percent. The Irish state is now considered by the markets to be the worst risk in Europe. They simply don't trust us anymore. This collapse in trust was prompted by a number of factors, chief among them being the revelations last week about how Anglo Irish Bank had used financial trickery to inflate its accounts at the end of its last financial year and fool the markets at home and abroad. Aiding and abetting them in this deception was another bank here, Irish Life and Permanent (ILP), the country's biggest mortgage and life assurance provider. Basically what happened was that Anglo transferred billions to ILP, which then sent the money back to Anglo again via its life assurance subsidiary. This trick allowed Anglo to put the billions on its books as a deposit rather than an inter-bank loan, which artificially inflated its financial health at a time when there was actually a minor run on the bank. The money only stayed on Anglo's books for a couple of days last September, but because it was there at the end of its financial year it gave a completely false picture of the bank to the markets. The result of this revelation last week was that the top three executives in ILP bank were forced to resign. Anglo's chairman and CEO have already gone, of course, after the revelations a few weeks back that the chairman had some €87 million in loans from the bank which he had been hiding at the end of each financial year by a similar bit of financial trickery. It has also been revealed that Anglo had pulled another stunt recently when it encouraged 10 major investors here to buy a 10 percent stake in the bank using money that it loaned them and which was secured mainly on the value of the shares being bought, a so-called sweetheart deal. Anglo has now been nationalized, and those shares are virtually worthless. And who is picking up the tab for the loan? The Irish taxpayer, under the guarantee provided at the time by the government. It could end up costing us €300 million. The financial regulator has also resigned, of course, having completely failed to do what he was supposed to do over the past few years - regulate the banks during the boom. An intriguing bit of information to emerge last week was that his predecessor as regulator is actually on the current board of ILP. It's a small world, particularly in Irish financial circles. All that was bad enough, but even more damaging to confidence in our financial system was the admission last week by Minister for Finance Brian Lenihan that he had failed to read the report into Anglo which he himself had commissioned and which had exposed the financial trickery that was going on. So it appeared to the markets that the country's finances were in the hands of someone who was completely out of his depth. The result was that last week, even though the Irish government had finally recapitalized the two main banks here, pumping €7 billion into them, share prices in the banks actually fell. One of the main reasons for this, as I said, was that the international markets simply don't trust us now. The other reason was that they don't believe that €7 billion is anything like enough to solve the bad loan problem in the two main banks here. Based on the size of the property loan books in the two main banks, many independent experts here now believe that at least €20 billion - and possibly a lot more - is needed to adequately recapitalize the Irish banks. And putting that much into them at present share values is the same thing as nationalizing them. So the Irish banks have a major problem. And it's made worse by the context in which they exist, with the Irish economy imploding and a population unable to face the reality of the cutbacks that are now essential to stop the country going bankrupt, much less start any kind of recovery. The most pressing requirement is to restore our competitiveness to protect jobs here, and that means cutting pay rates drastically. It also means drastically reducing costs in key industries like power and other services that affect businesses across the economy. Ireland is now such an expensive country to run a business in that the multi-nationals are lining up to get out. During the construction boom that problem was masked, but now it has been exposed and we can see that we are losing jobs so fast it is mind blowing. The country is now in fear but it is also in partial denial, with people still clinging to the hope that somehow they won't be affected. Instead of getting to grips with the problem the government is still playing ball with the unions, honoring pay agreements that were reached before the crisis developed and are now absurd. At the rate we are losing jobs now, unemployment here will soon pass 10 percent. The government says the jobless figure could reach 400,000 by the end of the year; others say it will be half a million, which is more like 20 percent than 10 percent. Thanks to the collapse in tax revenues, close to one euro in four being spent by the government this year will have to be borrowed, a situation that is not sustainable. To start getting its finances back in order, the government aims to reduce expenditure this year by €2 billion, mainly by making state workers pay for more of their pensions. But this is already provoking a fightback from the unions which point to the fat cats in Irish society who partly caused the economic meltdown here but are still raking in the money. The disgraced bankers and the failed regulator and all the rest of the top dogs get huge payoffs and pensions when they lose their jobs. But workers like those who sweated in Waterford Glass for years get almost nothing. And that is a huge problem for the government here now, the perception that the pain is not being shared equally. Many ordinary people who are losing their jobs and struggling to hold on to their homes and pay their day to day bills feel that there is a whole class of people here who are protected and are getting huge amounts of money, often at the expense of taxpayers or small shareholders, no matter how much they screw up. A perfect example emerged on television last week when the boss of the Bank of Ireland was interviewed and said he was taking a massive pay cut this year, which is the least one would expect when the taxpayers last week had to bail out his bank to the tune of €3.5 billion. When asked what he had earned last year, he said, "I think my total disclosed compensation in the report on accounts, I think, was €2.9 million." Don't you just love that "I think" phrase? It was so much he did not seem to be sure of the exact figure. And, asked the reporter, given that his bank had to be bailed out and therefore he had not done such a great job, how much would he be earning this year? "It will be less than €2 million," the banker said. As one politician here said, what kind of parallel universe are these guys living on? It would be amusing if it were not so serious. It shows a lack of understanding of the mess we are in that stretches right to the top. There is no immediate danger that Ireland will default on its debts, but the size of the problem we are now facing is alarming, and it will take a complete change of perception on the part of everyone here to get us out the other end. In the meantime we are facing five or even 10 years of very hard times. That is why the latest opinion poll here has put Fianna Fail at its lowest ever rating, in third place behind the Labor Party. People are angry and afraid. They don't see much sign that the government knows what to do. And the papers everyday are full of more stories about the bankers and property developers and politicians and rogue bankers and incompetent financial watchdogs who have brought the country to its knees.