How the Irish Bubble Burst

During the boom, the government—under the direction of Ireland’s largest political party, Fianna Fáil, in power for most of the last 80 years and famous for its patronage network—increased public-sector employment by 25 percent and also the rate of remuneration. The average public-service wage rose from $39,000 a year in 1998 to $64,000 in 2008, with pensions following suit, in return for a pledge not to go on strike.Meanwhile, the insouciance of foreign banks contributed to the bubble. The Royal Bank of Scotland alone lent $50 billion in Ireland. German banks extended $140 billion in credit and the British banks as much again. The champions, on a per capita basis, were the Belgians, weighing in at $57 billion.