The 2008–2011 Irish financial crisis, which had stemmed from the financial crisis of 2008, is a major political and economic crisis in Ireland that is partly responsible for the country falling into recession for the first time since the 1980s. In September 2008, the Irish government, made up of a Fianna Fáil/Green Party coalition, officially announced the country had entered a recession, with a sharp rise in unemployment occurring in the following months. Ireland was the first state in the eurozone to enter recession as declared by the Central Statistics Office.[1]
The numbers of people claiming unemployment benefit in Ireland rose to 326,000 in January 2009, the highest monthly level since records began in 1967.[2] Amidst the crisis, which has coincided with a series of banking scandals, the ruling Fianna Fáil party fell to third place in an opinion poll conducted by The Irish Times. The party placed behind Fine Gael and the Labour Party, the latter rising above Fianna Fáil for the first time.
The weakening conditions drew 100,000 protesters onto the streets of Dublin on 21 February 2009, amidst further threats of protests and industrial action. The country's Irish Stock Exchange (ISE) general index had reached a peak of 10,000 points briefly in April 2007, but by 24 February 2009 it stood at 1,987 points, a 14-year low.[3] The last time it stood under the 2,000 level was the middle of 1995.[3]
With the banks "guaranteed" and the National Asset Management Agency (NAMA) established, on the evening of 21 November 2010, the then Taoiseach Brian Cowen confirmed on live television the intervention of the EU/IMF in Ireland's financial affairs. The Fianna Fáil/Green Party coalition collapsed within months and was replaced by a Fine Gael–Labour Party coalition at the February 2011 general election.
The Irish economy expanded rapidly during the Celtic Tiger years (1997–2007) due to a low corporate tax rate, low ECB interest rates, and other factors. This led to an expansion of credit and included a property bubble which petered out in 2007. Irish banks, already over-exposed to the Irish property market, came under severe pressure in September 2008 due to the global financial crisis of 2007–2010.
The economy and government finances began to show signs of impending recession by mid-2008 [4] . Subsequently, government deficits increased, many businesses closed and unemployment increased. The Irish Stock index (ISEQ) fell. Many immigrant workers left.
Anglo Irish Bank was exposed to the Irish property bubble. A hidden loans controversy in December 2008 led to a further drop in its share price. The ISEQ dropped to a 14-year low on 24 September 2009, probably triggered by the unexpected resignation of former Anglo Irish Bank director Anne Heraty from the board of the Irish Stock Exchange the night before.[5]
The Irish economy entered severe recession in 2008.
Ireland entered into an economic depression in 2009.[6] The Economic and Social Research Institute predicted an economic contraction of 14% by 2010.[7] In the first quarter in 2009, GDP was down 8.5% from the same quarter the previous year, and GNP down 12%.[8] Unemployment is up 8.75%[9] to 11.4%.[10][11] The economy exited recession in the third quarter of 2009, with GDP growing by 0.3% in the quarter, but GNP continued to contract, by 1.4%.[12].
Due to the ending of the bubble, the residential and commercial property markets went into a severe slump with both sales and property values collapsing.
Developers such as Liam Carroll began to fall behind on their loan repayments. Due to the financial crisis, banks such as ACC pushed for their revenue recovery and requested liquidation of the development firms.
The Central Statistics Office estimated that 34,500 people left the country from April 2009-2010, the largest net emigration since 1989. However, only 27,700 of these are Irish nationals, an increase of 12,400 since 2006. It's also notable that more people went somewhere other than the UK, EU or US, traditional destinations for Irish emigrants, than any other destination.[13]
Following the May 2008 appointment of Brian Cowen as Taoiseach, the ruling Fianna Fáil party had been polling close to their 41% levels of the 2007 election but the party began to fall in the polls from September 2008. Their support fell to third place for the first time ever behind both leading opposition parties in a national opinion poll published in The Irish Times on 13 February 2009, polling only 22%.[14][15] A 27 February poll, indicated that only 10% of voters were satisfied with the Government's performance, that over 50% would like an immediate general election.[16] They gained about 24% of the vote in the June 2009 local elections and continued to languish as the crisis intensified during the remainder of the year, reaching a new low of 17% support in September 2009. During the 2009/2010 period opposition calls for an early election intensified and some of their own TDs resigned from the party supporting the calls and reducing the Government majority to single digits. The Government was urged by the courts to hold a long-delayed Donegal South by-election. By December 2010, following the IMF intervention, their support reached a further record low of 13% and their coalition partners, the Green Party, announced that they would withdraw support from Government in January 2011 once the 2011 budget had been passed. The Government announced that an election would take place in Spring 2011 but the intended date had to be be brought forward to 25 February 2011 following a widely criticised cabinet reshuffle. Taoiseach Cowen was replaced as party leader by Micheal Martin. At the election, Fianna Fáil received 17% of the vote and their seats collapsed from 71 outgoing to a record low of 20. The Fine Gael and Labour opposition secured record seat gains but no overall majority and formed a coalition government.
Ireland officially declared it was in a recession in September 2008. Prior to this declaration, the Irish government announced, on 3 September 2008, that it was to bring forward the 2009 government budget from its usual December date to 14 October 2008.[17] In a statement, the government claimed that this was largely due to a decrease in the global economy.[18] The budget, labelled "the toughest in many years",[19] included a number of controversial measures such as a proposed income levy which was eventually restructured,[20] and the withdrawal of previously promised HPV vaccines for schoolgirls.[21][22][23][24][25] Other results of the budget included a new income levy being imposed on all workers above a specified threshold and the closure of a number of military barracks near the border with Northern Ireland.[26][27][28][29][30]
An unexpected public outcry was invoked over the proposed withdrawal of medical cards and the threatened return of university fees. A series of demonstrations ensued amongst teachers and farmers,[31][32][33][34][35][36] whilst on 22 October 2008, at least 25,000 pensioners and students descended in solidarity on the Irish parliament at Leinster House, Kildare Street, Dublin.[37] Some of the pensioners were even seen to cheer on the students as the protests passed each other on the streets of Dublin.[38] Slogans such as "no cutbacks, no fees, no Fianna Fáil TDs" and "education is a right not a privilege" have since become commonplace in student protests against the government organised by the Union of Students in Ireland (USI) and the newly formed Free Education for Everyone (FEE), as have puns on the then Minister for Education and Science Batt O'Keeffe.[39][40] Changes to education led to a ministerial meeting with three Church of Ireland bishops[41] who were assured by O'Keeffe that religious instruction would be unaffected by the budget changes.[42]
Rebellion within the ranks of the ruling coalition government led to a number of defections of disenchanted coalition members. County Wicklow TD, Joe Behan resigned from the Fianna Fáil party in protests at the proposed medical card changes after suggesting that past taoisigh Éamon de Valera and Seán Lemass "would be turning in their graves at the decisions made in the past week".[43] Independent Deputy Finian McGrath then threatened to withdraw his support for the government unless the plan to remove the overs 70s automatic right to a medical card was withdrawn completely.[44] Taoiseach Brian Cowen postponed a planned trip to China, sending Minister for Education and Science Batt O'Keeffe ahead to lead the delegation.[45] Behan, alongside McGrath and former government minister Jim McDaid,[46][47][48][49] later voted against his former colleagues in two crucial Dáil votes on medical cards and cancer vaccines. These defections reduced the Irish government's majority of twelve by one quarter.
A supplementary budget was delivered in April 2009 to address a fiscal shortfall of over €4.5 billion.[50]
On 29 September 2008 the government issued an unlimited bank guarantee in favour of 6 banks that was to cost much more than the government estimated.[51][52] It was approved at the time by the European Commission. This was to result in the EU-IMF intervention in late 2010 (see below).
Despite the bank guarantee in September, by December 2008 the American ambassador was reporting to Washington that no clear plan was in place, after an interview with John McCarthy of the Irish Department of Finance and two other officials. McCarthy was quoted as saying that "forecasting anything in the current uncertain environment is almost impossible" and that the government could "only react given the fast pace of the downturn”. The interview was published in 2011 as a part of the wikileaks disclosures.[53]
On 5 January 2009, Waterford Wedgwood entered receivership.[54] On 30 January, workers at the Waterford Crystal plant in Kilbarry were told they would be losing their jobs. A statement issued by the receiver, Deloitte's David Carson, confirmed that, of the 670 employees, 480 of them would be laid off.[55] The workers responded angrily to this unexpected decision and at least 100 of them began an unofficial sit-in in the visitors' gallery at the factory that night.[55] They insisted they would refuse to leave until they had met with Carson.[55] Following the revelations, there was a minor scuffle during which the main door to the visitors' centre was damaged.[55] Local Sinn Féin Councillor Joe Kelly was amongst those who occupied the visitors' gallery.[55] A meeting held the following day did little to resolve the conflict,[56] with the sit-in continuing for almost two months until 22 March.[57]
On 18 February 2009, 13,000 civil servants voted for industrial action over a proposed pension levy.[58] They effected this action on 26 February.[59]
Days earlier, as many as 120,000 people, had protested on the streets of Dublin on 21 February.[2][60] This was followed by a further march through the capital by gardaí on 25 February[61] and a lunch-time protest by 10,000 civil servants on 19 March 2009.[62] This was followed by two separate taxi drivers' protests in Dublin on 20 March 2009.[63]
Labour leader Eamon Gilmore has stated his belief that a national strike would serve the country no good.[64] The strike was later called off.
In April 2009, the government proposed a National Asset Management Agency (NAMA) to take over large loans from the banks, enabling them to return to normal liquidity to assist in the economic recovery. NAMA's first appraisal was in September 2009, fortuitously timed just before the issue of the second one-year bank guarantee.
The costs of the bank rescues, NAMA and government deficits over the period look set to push Irish National Debt up to a ratio of 125% of GDP by 2015.[65] However, there have been a number of misleading estimates of debt statistics relating to the Irish financial crisis. Ireland, like Luxembourg, is home to a disproportionately large number of international financial services providers. Many statistical calculations include the debts of all banks located in Ireland without separating foreign owned banks from Irish banks. The liabilities of the Irish banks represent a figure equivalent to approximately 309% of GDP, the third highest in the EU.[66]
Against a background of massive private sector layoffs and pay cuts, the Irish Government and Irish Public Sector unions, including IMPACT, negotiated the Croke Park Agreement which provided for increased productivity, flexibility and savings from the public sector in exchange for no further pay cuts, and no lay offs. As of August 2011 there have been no compulsory layoffs in the Irish civil service despite the financial crisis.
In April 2010, following a marked increase in Irish 2-year bond yields, Ireland's NTMA state debt agency said that it had "no major refinancing obligations" in 2010. Its requirement for €20 billion in 2010 was matched by a €23 billion cash balance, and it remarked: "We're very comfortably circumstanced".[67] On 18 May the NTMA tested the market and sold a €1.5 billion issue that was three times oversubscribed.[68] By September 2010 the banks could not raise finance and the bank guarantee was renewed for a third year. This had a negative impact on Irish government bonds, government help for the banks rose to 32% of GDP, and so the government started negotiations with the ECB and the IMF.
On the evening of 21 November 2010, the then Taoiseach Brian Cowen confirmed that Ireland had formally requested financial support from the European Union's European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF),[69] a request which was welcomed by the European Central Bank and EU finance ministers.[70] The request was approved in principle by the finance ministers of the eurozone countries in a telephone conference call.[71] Details of the financial arrangement were not immediately agreed upon, and remained to be determined in the following weeks,[72] though the loan was believed to be in the region of €100 billion, of which approximately €8 billion was expected to be provided by the United Kingdom.[70]
Following criticism of the action,[73] the Green Party leader John Gormley signalled that his party would seek a General Election in January, 2011, with the implicit threat being that they would pull out of Government; with the addition of a number of Independent government TDs declaring that they would not continue to support the Government and speculation mounting, Brian Cowen called a press conference in which he announced that the Government intended to introduce and pass that year's Budget, and its constituent parliamentary bills, before having the 2011 election.[74]
However, on 23 November, rebel members of Brian Cowen's ruling Fianna Fáil party and opposition leaders sought no-confidence vote for the Government and dissolution of the Oireachtas before a crucial budget vote on 7 December 2010, that should open the way for adopting the rescue package.[75]
On November 28, the European Union, International Monetary Fund and the Irish state agreed to a €85 billion rescue deal made up of €22.5 billion from the European Financial Stability Mechanism (EFSM), €22.5 billion from the IMF, €22.5 billion from the European Financial Stability Facility (EFSF), €17.5 billion from the Irish sovereign National Pension Reserve Fund (NPRF) and bilateral loans from the United Kingdom, Denmark and Sweden.[76]
Eurogroup President Jean-Claude Juncker said that the deal includes €10 billion for bank recapitalisation, €25 billion for banking contingencies and €50 billion for financing the budget.[77]
2010 saw several notable protests against austerity in Ireland.
On 6 February 2011, it was revealed that Ireland had received a first €3.6 billion of the rescue package from the EFSF. This is a slightly higher amount than was previously expected mostly due to the better than expected auction of the EFSF bonds in January 2011.[78][79] Later that month the coalition government of Fianna Fáil and the Green Party lost the 2011 general election and were replaced by a coalition made up of Fine Gael and the Labour Party.
In April 2011, despite all the measures taken, Moody's downgraded the Irish banks' debt to junk status.[80] Debate continues on whether the new government will need a "second bailout".[81] By August 2011 the largest of the six state-guaranteed banks, Bank of Ireland, had a market capitalisation of €2.86 billion,[82] but loans to the six by the ECB and the Irish Central Bank were about €150 billion.[83]
As the year went on students became increasingly concerned about the honesty and integrity of the pledge signed by Ruairi Quinn before the election that the Labour Party would oppose increased tuition fees.[84]
On 16 November 2011, thousands of students, their parents and families, descended on Dublin from around the country and marched on Government Buildings amid concerns about the reintroduction of third-level fees.[85][86] A small group also engaged in a sit-down protest outside the Fine Gael office on Dublin's Upper Mount Street.[87]
At around 16:00 on 29 November 2011, three student union presidents (of Galway-Mayo Institute of Technology, University College Cork and IT Carlow) under the leadership of Union of Students in Ireland (USI) President Gary Redmond occupied a room at Department of Social Protection on Dublin's Store Street as part of a continued effort to have the Labour Party clarify its position on tuition fees. Police broke down the door of the room in which they were stationed and led them away.[84][88] The students came armed with a chemical toilet and supplies of food that could have lasted them weeks.[89][90] Ten student union presidents also attempted to occupy a room at the Department of Enterprise on Kildare Street for the same reasons.[88]
Nine FEE students, also seeking clarification on the government's view on third-level fees, participated in a peaceful sit-down protest by occupying the constituency office of Fine Gael TD and former mayor Brian Walsh in Bohermore, Galway, around midday on 30 November 2011.[91][92][93][94] They unfurled a banner on the roof with the message, "FREE EDUCATION NOTHING LESS". They were imprisoned by the police and released a short time later.[95]
On 2 December 2011, eight students from the National University of Ireland, Maynooth (NUIM), including the university's student union president Rob Munnelly, began occupying the Naas constituency office of Fine Gael TD Anthony Lawlor.[96] They did so with sleeping bags, clothes, a chemical toilet and a week's supply of food and were supported by other students on Facebook and Twitter.[97][98] During the occupation Munnelly debated with Lawlor live on Kildare TV, USI President Gary Redmond visited the revolting students and a banner with the slogan "SAVE THE GRANT" was erected at Lawlor's entrance.[99][100]
The closure of Roscommon hospital led to continued protests by the Roscommon Hospital Action Committee.[101][102]
Occupy Dame Street began on 8 October 2011, a Saturday afternoon.[103][104][105]
On 26 November 2011, thousands of people marched against austerity in Dublin.[106][107][108]
On 1 December 2011, Roscrea District Court solicitors staged a walkout over the courthouse's closure.[109]
Hundreds of people from County Donegal converged on Buncrana on 3 December 2011 to protest against austerity and to tell the government that "Inishowen and Donegal says no to further cuts and austerity".[110]
There was also rebellion within the ranks of government. On 15 November 2011, Willie Penrose resigned as Minister of State for Housing and Planning due to his opposition to the Government's decision to close the army barracks in Mullingar.[111][112][113] He also resigned the Labour parliamentary party whip.[114] Tommy Broughan TD was expelled from the Labour Party on 1 December 2011 after voting to reject a government amendment to extend the bank guarantee for another year.[115]