Introduction
The land of Ireland went through the worst financial crisis in the year 2008. The financial troubles in the land were not a new thing for the land but this experience brought about a high degree of damage to the financial establishment as well as the overall economy. In the year of 2008, Ireland experienced a breakdown in its financial infrastructure which included the financial infrastructure getting subjected to a high degree of failure which was due to certain conditions which were macroeconomic in nature. Moreover, along with the financial instability and the failure experienced by almost all the banking systems of the land, a condition of an explosion in the property infrastructure was developed and implemented due to an increase in the growth ratings of the economy of the land. This particular property boom was then more affected and to a large extent by the expansion and growth of the fiscal regime, a decrease and overall drop in the interest rates as well as an increase in the population (Bielenberg, 2018). All these factors contributed to the financial crisis that the land experienced. Considering a more detailed review on the financial crisis of the Irish land, the instability of the property market which was fueled by the regulatory system of banking which was liberalized which resulted in the development of negative impacts on the overall financial establishment. The establishment and infrastructure of all the international markets in the Irish land froze up due to which funding became a big problem. Along with this an increase in the credit defaults was observed regarding the property of the bank which was caused by the declination of the price ratings relating to the houses in the area (Ryan, 2013).
Evolution of Ireland from Financial Crisis
All these factors regarding the liberalization of the regulatory system of banking along with an instability in the property market followed by the dropping of the interest rates led to the inculcation of a rapid downfall in the banking and funding infrastructure of the Irish land which even stopped the flow of international money which is why a decision was taken by the government of Ireland to issue and then implement a guarantee regarding all the debt responsibilities in order to stabilize and bring the financial infrastructure of the land back on its feet (Kennedy, 2010). Along with the introduction and implementation of a guarantee regarding debt responsibilities, the third largest bank of the Irish land was also nationalized which included the process of recapitalization of the important financial infrastructures in the land which summed up to an amount of approximately seven billion. The nationalization process of the largest bank of the Irish land also included the development and implementation of a management agency which could effectively monitor as well as control loans which were developed in the banking infrastructure of the land which were mostly all nonperforming in nature along with being toxic and amounted to a totality of approximately billions (Raymond, 2013). A certain set of policies for the developmental infrastructure were introduced and implemented. These set of developmental policies and regulations involved the tax relief policy for the profits relating to the exports which led to the provision and development of large amounts of investment of the direct nature in the foreign market along with the inculcation and implementation of liberalization in the trade market of the Irish land. Through these policies and regulations, the monetary and financial dependence of the Irish land on the land of the United Kingdom was reduced to a great extent and acceleration and enhancement were observed in the trade market. The increase in the trade markets followed by a decrease of the financial dependency on other major countries then brought about a revolution and an enhancement in the economic infrastructure of Ireland (Conroy, 2015). Following a time span of a few years, the economic competitiveness of the Irish land followed by the enhancements and positive responses in the performance relating to trade led to the development of stable economic conditions in the land which provided a positive impact on the economic market which was followed by the development of a certain degree of expansion in the investments of the economic market of Ireland regarding the foreign trades. These revolutionary changes once implemented in the economic infrastructure of the Irish land led to the economy of Ireland catching up with and matching the economic rates and investments of all the other leading economic markets. The economic development in the Irish land was brought about by a number of different economic policies and regulations which provided stability in the economic market. This development was not a stable one throughout the economic and financial years of the Irish land due to the production of speculation regarding property as well as borrowing (Honohan, 2008). Furthermore, the introduction and implementation of the double Irish tax led to an improvement in the tax policies of the land which provided beneficiary services to the multinationals. This double Irish tax regulation led to the shifting of the profits obtained by the companies and multinational firms from countries that possessed a relatively high tax rating to countries with a low tax rating. This shift occurred through the effective transference of the payments that were related to intellectual properties in the Irish land through a number of registered subsidiaries residing in the Irish land without the involvement of income tax. Ireland also brought about a certain degree of improvement in the business environment by collecting and acquiring overseas investments. This relative improvement in the business investment market in the Irish land was a result of the collaboration of various and highly important multinational firms (Ireland’s Five-Part Crisis: Integrated National Response, 2009). During the period of a major strain on the deficits and economic structure of Ireland, the Irish land still ensured the smooth flow of investments during these times of financial trouble. Along with the introduction and implementation of policies and regulations such as the double Irish tax for the beneficiary arrangements of the multinational firms along with other tax arrangement, particular investments from the US were also incorporated which amounted to a total of approximately two hundred and seventy-seven billion dollars which made up a total percentage of 74 of the total investments acquired from the US. This paved the way for the establishment of a reputation of Ireland as the land with freedom in regards to the trade economy. The adequate efficiency and flexibility of the promotion agencies in Ireland regarding investments have led to the provision of a sustained degree of investments (Lillis, 2012). The economic market of Ireland has experienced a gradual change from a damaged economic and financial infrastructure to a smart and developed economy which has directed all its financial activities through the inclusion and implementation of clean technological devices and components followed by a various state of the art computing services. The reasons and different factors that have led to the evolution of Ireland from the financial crisis that the land has been experiencing since years include increase in the foreign investments rate, the EU membership as well as subsidies, the development and inclusion of a stabilized national economy infrastructure along with a decrease in taxes (Ireland’s Economic Miracle, 2007).
Foreign Investments
The membership of the Irish land with the European Union along with the adoption of all the benefits from the European Union by the economic infrastructure of Ireland has provided the Irish land with the ability to acquire foreign investments. These foreign investments include high profile as well as multinational companies. These companies along with investing also located their workspaces in Ireland through the convincing of the Irish Development Authority (Conroy, 2015).
Deregulation
The intervention of the government of Ireland in the business and financial proceedings of the land provided a great attraction for the inculcation of investments to the foreign investors. Along with this a competition policy was also introduced and implemented which led to the provision of various high degree jobs in different sectors which included legal as well as financial management along with accounting services (Ireland’s Economic Miracle, 2007).
Corporation Tax Rate
According to economists, the decrease in the rate of corporation tax also led to the economic evolution of Ireland. These low rates of taxes along with the stability in the case of macroeconomic factors followed by the stability in budgets brought about a certain degree of confidence from the local as well as international investors (Raymond, 2013).
Educated and Skilled Workforce
The financial and economic evolution of Ireland can also be accounted for the fact that a high degree of development was observed in the sector of human capital. This development involved the usage and inclusion of an educated workforce that was highly skilled as well. This development in the Irish land was brought about by making the secondary education free and conducting investments in the areas of financial as well as human resources in the category of education (Lillis, 2012).
Structural Funds
Ireland paid a certain sum to the budget of the European Union after which a total sum of approximately 43 billion was acquired by the European Union. These structural, as well as cohesion funds provided by the European Union, have paved the way for the development in the financial infrastructure of Ireland. These funds include investments in various categories and sectors which include different industries, training, and facilitation, education as well as the transport sector (Lillis, 2012).
Ireland has been experiencing these drastic downfalls and instabilities in its economic infrastructure since a long time which has made the economic architecture comparatively strong than what it was years back since the Irish land and its financial infrastructure has greatly developed over the years and has incorporated a developed set of economic policies and regulations that have drastically influenced its falling market and has led to the provision of investments. The economic and financial development of Ireland over the years to overcome its financial crisis has provided a number of different lessons that can be adopted by the other countries which have been or are still suffering from such a scenario.
Lessons Learnt from the Financial Crisis of Ireland
The lessons that can be adopted and implemented by other countries include
- There is a requirement for the establishment of authorities related to cross-border.
- For the protection of the taxpayers, the countries need to consider all the failures that can occur in the future and develop as well as devise certain strategies for the resolution and removal of all such impediments.
- The regulatory capital must be given top priority.
- There is a dire need to incorporate flexibility and resilience in all the sectors of the economy which include banks, education, various businesses as well as governments
- The policy tools and regulations both of micro, as well as macro level, need to be included and implemented in order to reduce and minimize the occurrence and development of systemic risk (Lessons from the crisis 10 years on – Ireland learned the hard way, 2018).
Comparison of Asian as well as European Financial Crises
When conducting a comparative analysis of the financial crisis that occurred in the economic infrastructures of Asian as well as European countries similar patterns and vulnerabilities have been observed. Currency rises were observed in the economies of the Asian countries that included Korea, Indonesia, Philippines, and Malaysia. Along with this, a declination in the exchange rates and hindrances in the capital inflow was observed for the Asian countries. Considering the financial crisis situation in the European countries the damages included the loss in the international reserves leading to declination, stops in the capital inflows, oversizing of the deficits along with the occurrence of a major crisis in the currency and investments sector (Kamppeter, 2011).
When considering the different policies and regulations that were adopted in order to overcome financial crises that were experienced by different countries, a number of years were taken by the largest economies to minimize the hindrances and recover from the financial crises. Among all the countries, the economy of China incorporated major growth along with the unfolding of the economic crisis and a doubling was observed in the gross domestic product of the country. Other countries took a slow time to recover which involved Iceland, Ireland, Spain, Portugal, Greece as well as Italy. The US economy recovered in a very short time but the recovery of most of the European countries was delayed. Moreover, the monetary stimulus observed and implemented by the central banks of many countries has provided enhancements in the stock markets (Truman, 2013).
Figure 1 (Truman, 2013)
Figure 2 (Truman, 2013)
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