Irish lessons for the world

Although once known as Celtic Tiger for its strong economy, Irish government announced to accept outside financial help to tackle its economic deficit officially last Sunday.

Celtic Tiger requires help

Irish Prime Minister Brian Cowen said: "We are now in a position to apply for assistance."

He also has confirmed that the country and the EU have agreed a financial rescue package.

Negotiations would be held in the coming days with the EU and the International Monetary Fund (IMF) to decide the final amount, which is expected less than 100bn euros (£85bn; $136bn) according to Irish Financial Minister Brian Lenihan.

The UK and Sweden have also offered direct loans.

Why the country is now in a mess?

The country’s economic growth - helped by low corporate tax rates – was mainly built around the property market.

However, house values in Ireland have suffered a dramatic collapse since 2008. Bad debts built up in the country’s main banks, leaving them with huge liabilities and needing bailing out by the government.

This has opened a huge hole in the Irish government's finances - which will see it run a budget deficit equivalent to 32% of GDP this year.

An alarm to booming economics

What lessons could booming countries like the BRIC four (Brazil, Russia, India and China) learn from the Irish crisis?

Economists warn China that its property bubble burst is in danger now as more houses are built in the country while people who actually cannot afford to buy loan from banks to purchase them. 

Harvard professor Kenneth Grove said that China’s economic recession would have a severe impact on the world’s bank system.

The Chinese government is planning to introduce a property tax to discourage property speculation and contain surge in home prices.

EU concerns

EU Finance Commissioner Olli Rehn said the loans would help preserve the stability of the eurozone - the group of 16 nations using the euro as their common currency.

EU officials fear Ireland's financial problems might spread to other eurozone countries with large budget deficits, such as Spain and Portugal.

The EU and the IMF launched an 110bn euro rescue programme for Greece in May after the government was faced with the prospect of bankruptcy.