Photo: flickr user danieljordahl
Just because Ireland is likely to receive a financial backstop for its financial system from the EU/IMF doesn’t mean that its economy is out of the woods.A painful downturn remains in the cards, and it could give the Irish economy a harsh haircut. Even if various bondholders end up being saved from one.
A depressed and indebted country in the late 1980s suddenly became the bubbly Celtic Tiger of the 1990s. Then the bubble just as suddenly burst, an experience that could cost Ireland as much as one-fifth of GDP annually in years to come. In 2010 the budget deficit will be at least 32% of GDP and the public debt is almost 100% of GDP.
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