The ECB made Ireland very drunk.

The Irish Property bubble differed from a normal bubble for one major reason, it wasn't a more greedy banking system, it wasn't a more greedy public, it wasn't a more complacent political class, I have no doubt all of these played their part in the crash but they are also usual occurrences in a property bubble. The difference with the Irish property bubble was the fact that Ireland was a member of a Currency Union called the Euro. A currency union that made little sense for Ireland to join, Ireland was and is in a different economic cycle to the Euro’s biggest economies, Germany and France. Throughout the 00s Ireland continued to grow at high rates, with property increasing in value massively. Normally the Central Bank would have raised interest rates to reduce the supply of money in the country. However Ireland accounted for 1% of Euro area GDP and the European Central Bank was focused on the picture overall so they were more worried about recession in Germany and France. The interest rates were dropped to near the floor. This meant that during Ireland’s asset bubble, the European Central Bank was fanning the flames, or to put it another way, they were lacing the punch with more and more alcohol.

The banks had to continue making money with interest rates on the floor, to do this they chose to lend more money, this meant lowering their requirements.
The Irish people also responded by taking on high personal debt, financing holidays, extensions and second homes.

Property developers began paying exorbitant prices for land, with many ambitious plans such as Sean Dunne’s plans for the affluent Ballsbridge, which included a 30 story tower as its centrepiece.

Many economists predicted the crash of the property bubble for 2004 or early 2005, (as seen with some of the videos I have posted). The very fact that it continued on until late 2007 points very clearly to the ECB prolonging it by inadvertently throwing money at the Irish property bubble, Ireland was too small for the men in Frankfurt to worry about. Only when it had all gone wrong did they sit up and take notice.




http://www.mountbrook.ie/jbc/


http://www.guardian.co.uk/music/2008/nov/03/u2-tower-plans-shelved