The luck of the Irish
Ireland's property hangover continues
Sep 30th 2010ON SEPTEMBER 30th, the Irish government revealed the full extent of its financial-sector bail-out. Anglo Irish Bank and other lenders that made bad commercial-property bets are to be provided with fresh capital to the tune of 20% of GDP this year. As a result, Ireland’s budget deficit is forecast to rise to 32% of GDP and its gross government debt to 96% of GDP. These huge costs contrast sharply with those in other countries that have had to rescue their banks. Ireland’s financial sector is so large relative to national income that, if it is not propped up, it has the ability to “bring down the sovereign”, according to Brian Lenihan, the finance minister. But Ireland does have some breathing space: it doesn't need to borrow from the bond markets until early next year as it has enough cash to cover immediate needs. The government will just have to hope that the public finances don't deliver any more nasty surprises in the intervening period.