The Fall of the Celtic Tiger and the Spanish Bull

By 2000 the Irish and Spanish economies were two of the fastest growing and most successful economies in Europe. Indeed, Ireland and Spain had achieved a remarkable macroeconomic performance producing comparatively (by European standards) high levels of economic growth, budget surpluses, and a very low debt to GDP ratio. Both countries had also become net immigrant recipients. This success, however, came to a halt in 2008. By 2010 economic growth was significantly negative, the budget deficit was out of control and the debt to GDP ratio had risen dramatically. In an unprecedented development, Ireland was forced to apply for an emergency bail-out package from the Troika, and Spain had to request a bailout for its financial sector. This paper seeks to examine why Ireland needed a full-fledged bailout while Spain did not.