1. Ireland – The tiger that tripped the euro
Leif Beck Fallesen
Europabevægelsen på Fyn

2. Root cause: The financial crisis
Global finance crisis started Spring 2007 on the U.S. mortgage market – transmitted to Europe in August 2007
Near-death experience: Sept. 14th 2008, Lehman Bros. collapsed and global credit markets froze completely
Debt, public and private, suddenly became unsustainable, focus on PIGS; Portugal, Ireland, Greece and Spain

3. Why Ireland?
Ireland had been the growth champion and darling of international investors and banks – including Denmark’s largest; Danske Bank
Housing bubble; extremely sensitive to credit (that disappeared)
Like Denmark, Ireland is a small open economy, global demand dropped sharply
Public finances hit by lower growth and higher unemployment

4. How Ireland tripped the euro
Original euro blueprint for a solution; Irish banks would write off bad loans, markets would impose higher borrowing rates on the Irish government, forcing it to enact austerity policies. Irish problem solved in Ireland.
BUT: 1) Banks could not write off bad loans without going bankrupt 2) Financial markets could or would not lend money and feared next PIGS-collapse, i.e. CONTAGION

5. Source: Eurostat

6. Source: Eurostat

7. Source: Eurostat

8. Source: Eurostat

9. EU limit:
60% of GDP
Source: IMF

10. Source: IMF

11. Source: IMF

12. Italy the new I in PIGS?
Ireland was first in, and is looking to be the first out of the battle to stay in the euro. Italy is a much bigger I in PIGS
Greece was able to reduce unsustainable debt levels by a (partial) default. Foreign banks (Danske) have written off private debts, will public debt be reduced?
Political challenge; will (any) government survive implementing austerity policies?

13. Repairing the Euro: Systemic change
Real Europeans call it political (fiscal) union. Sounds great to many in France, Benelux, and Italy (with caveats). Non-starter in Germany, Scandininavia and the U.K. (which may leave)
Pragmatic changes required. Who saved the euro; The European Central Bank. Who should have more power: the ECB. Banking union is all about controlling the banks

14. Saving the euro (and the EU)
More (pragmatic) European integration is needed; irresponsible national banks and contagion was not foreseen by euro architects
Only a stronger EU (eurozone) can provide collateral or finance stronger growth in the EU.
Real challenge; austerity is suppressing growth and more importantly: destroying the political parties that support reforms (Italy: send in the clowns …)