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Hell at the Gates: How the financial crash hit Ireland

Not everyone knew it but the ship of state was about to careen over a cliff in March 2008. By the end of the year we felt the full effects of a crash that would scar a generation


No entry: Electrical cable is used to secure a security fence surrounding Cnoc an Iuir, an empty and unsold housing development in the village of Drumshanbo, Co Leitrim

No entry: Electrical cable is used to secure a security fence surrounding Cnoc an Iuir, an empty and unsold housing development in the village of Drumshanbo, Co Leitrim

In the spotlight: Brian Lenihan as Finance Minister attends a EU meeting in Brussels on November 28, 2010. Photo: Thierry Roge

In the spotlight: Brian Lenihan as Finance Minister attends a EU meeting in Brussels on November 28, 2010. Photo: Thierry Roge

Jean-Claude Trichet

Jean-Claude Trichet

Sean Quinn

Sean Quinn

Patrick Honohan

Patrick Honohan

Merkel and Sarkozy

Merkel and Sarkozy


No entry: Electrical cable is used to secure a security fence surrounding Cnoc an Iuir, an empty and unsold housing development in the village of Drumshanbo, Co Leitrim

When the first tremors of the financial shock arrived in Ireland 10 years ago, it took some time before we realised what was really happening.

On March 17, 2008, stock markets around the world tumbled - including Dublin's ISEQ index.

In the newspapers the following morning, there was news that the share price of Anglo Irish Bank had collapsed by 15pc on a day that became known as the St Patrick's Day massacre.

But few were distracted from the gaudy spectacle of our national celebrations on that day.

Rather than tut-tutting at the activities of our native bankers in Anglo and other financial institutions, we were more likely to give out about the drunken excesses on the streets of Dublin after the St Patrick's Day parade.

Dozens of riot police were called in after a day of drinking descended into chaos.


In the spotlight: Brian Lenihan as Finance Minister attends a EU meeting in Brussels on November 28, 2010. Photo: Thierry Roge

In the spotlight: Brian Lenihan as Finance Minister attends a EU meeting in Brussels on November 28, 2010. Photo: Thierry Roge

In the spotlight: Brian Lenihan as Finance Minister attends a EU meeting in Brussels on November 28, 2010. Photo: Thierry Roge

True, there was talk of recession in the air in the spring of 2008 - largely caused by frantic over-borrowing - and house prices were already falling.

But the well-to-do middle classes tended to talk about the slump in terms of saving a couple of euro by buying their wine in Lidl, rather than a serious collapse.

Ordinary workers were not yet feeling the full effects of a crash that would scar a generation, and leave many without a home and without a job.

Around this time, a young TD named Leo Varadkar told Review about how he was coping with recession: "I think I am in a better situation than most. I have a good salary, although with the pay freeze and inflation, I'm going to feel the pinch."

Leo said the mortgage repayments on his apartment would rise to €2,100 a month as he slipped into negative equity.

"When I got elected as a TD, I went out shopping for lots of nice suits, but I won't be buying any fancy suits for a while," he said.


Jean-Claude Trichet

Jean-Claude Trichet

Jean-Claude Trichet

There was still a mood of unreality in the air, as the Celtic Tiger prepared to utter its terminal breath.

Ross O'Carroll-Kelly's satirical Guide to (South) Dublin had captured the mood of Celtic Tiger opulence in such boomtime enclaves as Dundrum Town shopping centre.

Its habitués were described as "predominantly 16 and 17-year-old girls with bodies like nine-year-old gymnasts, wearing UGG boots, mini-skirts and expertly applied fake tan''; and teenage boys with blond streaks, wearing pink Airtex tops or Leinster shirts - each carrying a large frothy latte or smoothie "to-go''.

The shopping centre car park, according to the guide, was full of BMWs, Beetle convertibles and people carriers built like Panzer tanks.

As well as being the last days of the Celtic Tiger, these were also the last days of the glorious era of Bertie Ahern, who had been in charge for over a decade.

'Economic miracle'

Only a short time earlier, the Ireland of Bertie had been considered a model of sound governance. Delegations of foreign civil servants thronged the arrivals lounge at Dublin airport on fact-finding missions to discover the secrets of the "Irish economic miracle" in the utopia-by-the-Liffey.

Such was our success that Bertie's trusty sidekick Brian Cowen was even described in newspaper reports as "the envy of other EU Finance Ministers''.

But when Ahern announced his departure in April, and Cowen took over in May, the financial clouds were already darkening. It was widely remarked that Bertie was bailing out in the nick of time. Brian Lenihan had a sense of foreboding as soon as he arrived in his department for the first time as the new Minister for Finance on May 7, and seemed to be one of the few ministers to realise the bubble had well and truly burst.

He was slated when he said he had the misfortune to take the helm in finance just as the building boom was coming to a "shuddering end".

Privately, a senior government official told the Green Party minister Eamon Ryan: "The country's f***ed. It's going down the tubes".

The ship of state may have been about to careen over a cliff, but we still had not seen the last gasps of Celtic Tiger excess.

At the end of the summer, staff at one bank were invited to a 'Back To School ­Doombuster Party' in the Mansion House.

An email message, which conjured up the spirit of the musicians who played on the sinking Titanic, read: "Dear colleague, The stock markets are down. They say the economy is in recession.

"The holidays are over... so there is only one thing to do - party!"

And party they did. The mega-bash cost the bank €80,000, as employees, most of whom were soon to lose their jobs, knocked back bottles of Prosecco, Pinot Grigio and Merlot.

Over at AIB in that same month, there was similar largesse, as the bank flew a group of clients on a "sevenstar" all-expenses-paid junket to the Ryder Cup. It was described at the time as "the corporate jolly of a lifetime".

That same September, there were reports about Seán Dunne's gargantuan, vainglorious proposal for a 37-storey metropolis in the sky in Ballsbridge.

And the Irish Independent reported on the €1.3m cost of an elaborate new glass-framed sweet shop for TDs at the entrance of Leinster House. It was described as "the most expensive tuck shop ever built in Ireland". But on the ground, ordinary punters could sense the economic trouble and were not fobbed off by official reassurances that Irish banks were well capitalised, as their share prices continued to go south.

There were reports of scared bank depositors taking out their savings, stuffing their cash into mattresses, or burying the money in the garden.

In this feverish atmosphere, there was genuine concern about whether ATMs would work - and jokes that the "Insufficient Funds" message on a bank machine might refer to the bank itself.

Panicking callers to RTÉ Radio 1's Liveline talked of taking thousands out of the banks, and putting it in the post office, where there was a higher deposit guarantee. At one point, Joe Duffy asked a woman what it felt like to carry €70,000 down the street.

Duffy said of the bankers: "If they come out with their hands on the Bible and say 'We''re not in trouble'', why should we believe them?"

Around about this time, I remember being spooked after watching Tonight with Vincent Browne on TV3 - a programme guaranteed to give viewers a scare at bedtime with its apocalyptic tales of economic woe.

When the programme was over, I rushed to an ATM to take out €100 in case the bank would not be open in the morning.

The notion that banks might shut down was not far-fetched and the government eventually propped them up with the notorious bank guarantee, brokered late at night on September 29.

By the end of the year, most workers felt lucky if they were still in a job and many were already suffering the effects of pay cuts.

Old tupperware containers were retrieved from the back of cupboards and used for workplace lunches by staff who could not longer go to restaurants or cafés to eat.

Restaurateurs and publicans were among the first casualties as people stopped going out, and the market for new cars collapsed, leaving empty showrooms in country towns and city suburbs.

Before the sharpest falls in stock markets and the collapse of banks in September, building workers were already feeling the effects of the crash and losing their jobs.

Ghost estates

Figures from the Central Statistics Office during the summer showed a surge of 63pc in the number of young men signing on the live unemployment register - and many were bricklayers, carpenters and workers from other construction trades.

As credit dried up, unfinished building sites were suddenly shut down and the staff laid off, leaving ghost estates all across the country. These became the heavily-photographed symbols of Celtic Tiger folly in newspapers across the world.

The building workers were quickly joined by architects, engineers, estate agents and bank staff on the dole queues, or in the departure lounge of Dublin airport.

According to the Nevin Economic Research Institute, nearly half a million people, including Irish-born and foreign workers, left Ireland in the six years after April 2008.

We saw the emergence of a Skype generation of sons, daughters, parents and grandparents, communicating on computers with each other from the far flung corners of the earth.

In the depths of recession, a Kerry mother told Review of the bereft feeling as the last of her sons in the construction business left the country for the United States.

With her boys' shining GAA medals decorating the wall of her living room, she said: "It was dreadful, it really was. If there had been a job here for him, he would have stayed. I hated to see him and the other boys go but I would never hold them back. I miss my children terribly everyday."

With many families struggling to pay their mortgages and repay their debts, poverty levels increased.

The troubles were not just affecting those on social welfare and low incomes. According to St Vincent de Paul, it also hit middle-income groups, and the numbers calling the charity almost doubled.

John Monaghan, vice-president of SVP, told Review soon after the crash: "There are a lot families on reasonable incomes - they may have had two cars and big houses - but their outgoings are so great that the effects are crippling.''

As he struggled to put the country back on an even keel, the Minister for Finance cut a Churchillian figure, forced to implement the most draconian cutbacks in the history of the State.

In hindsight, many would question his judgment in guaranteeing the debts of the banks, with losses to the State of many billions, but few doubted his courage.

In his budget speech of 2009, the Fianna Fáil minister boldly declared: "Our plan is working. We have turned the corner."

But the State's finances were to get a lot worse in the following months, and eventually Lenihan had to face the realities of a bailout from the IMF, the European Commission and the European Central Bank, and an even tougher programme of austerity.

Two years after the crash - with little end in sight to the banking crisis - he cut a forlorn figure when he flew to Brussels to sign a deal, which was seen as surrendering part of our sovereignty.

In an interview after he left office, he said: "I've a very vivid memory of going to Brussels to sign the agreement and being on my own at the airport and looking at the snow gradually thawing and thinking to myself, this is terrible. No Irish minister has ever had to do this before."

As he put it himself: "I had fought the good fight and taken every measure possible to delay such an eventuality and now hell was at the gates."

Since 2013, Ireland has enjoyed a partial recovery. But for many, the wounds of the crash of 2008 remains sore. Some of the emigrants who put down roots elsewhere during this period will never return and tens of thousands of heavily indebted mortgage holders are still struggling to hold on to their homes. For them, it really was a lost decade.



In the years following the crash, ­u­nemployment rose from 5pc to 15pc.

* Between 2007 and 2013, property prices fell by 54pc

* Calls to St Vincent De Paul doubled in the two years after the crash

* A survey by the Irish League of Credit Unions in 2011 showed almost a quarter of Irish people had less than €20 per week to live on once essential bills were paid.

* New car sales plummeted by 62pc in the year after the crash

* Alcohol consumption fell significantly from 13.2 litres of alcohol in 2007 to 11 litres in 2009

* A Bord Bia survey showed the average household spent €600 less on groceries two years after the crash

* Over 80,000 people gave up private health insurance between 2008 and 2011.

2007-2010: The core of the crisis


January: Anglo Irish Bank named "best bank in the world" by consultants Oliver Wyman.

February: Fears over US sub-prime mortgages flare up and fade.

June: Beginnings of the "credit crunch" globally as investor appetite for risky corporate debt and mortgage debt dries up.

August: The ECB claims it has ­unlimited funds for banks after French giant BNP Paribas closes two funds ­because of losses and Europe's ­interbank money market grinds to a close.

September 14: The crisis hits the streets as UK bank Northern Rock suffers a public run.

October 31: Anglo Irish Bank raises €2bn in so-called "covered bond".

November 28: Anglo Irish Bank reports record profits of €1.24bn.



January: US sub-prime mortgage crisis flares up and cash begins to drain from riskier property-backed assets globally.

February 22: Northern Rock nationalised by UK government.

March 14: US bank Bear Stearns near collapse. JPMorgan agrees a rescue but on condition that Bear Stearns' creditors are bailed out by US taxpayers at a cost of almost $30bn.

March 17: The crisis hits Ireland: A "St Patrick's Day massacre" on stock markets. Shares in Europe and the US plunge. Anglo Irish Bank's stock fall more than 15pc in a single day. The Irish stock market closes at its lowest level in three years. Banks and construction shares are worst hit.

July 3: ECB President Jean-Claude Trichet (left) raises interest rates, sapping credit supply further.

July 15: The Quinn family raises its stake in Anglo Irish Bank to 15pc. It subsequently reaches 20pc but does not have to be publicly declared because the family used contracts for difference (CFDs) instead of buying shares.

September 15: US bank Lehman Brothers files for bankruptcy in New York, causing turmoil in the global financial system.

September 17: Anglo Irish Bank executives meet Central Bank officials. Anglo wants a €7bn emergency loan.

September 29: The Bank Guarantee: Irish Government takes an overnight decision to guarantee the banking system, putting taxpayers on the hook for potentially €440bn.

October 3: US approves the Troubled Asset Relief Programme (Tarp), a $700bn bailout fund to buy bad assets out of banks.

October 8: The ECB finally cuts rates, in tandem with other central banks.

December 3: Anglo Irish Bank's annual results say the bank is profitable and solvent.

December 21: Irish Government says it will inject €5.5bn into the three main banks, starting what will become a €64bn bailout.



January: Anglo Irish Bank nationalised.


Sean Quinn

Sean Quinn

Sean Quinn


Seán Quinn (above) says he has lost €1bn on Anglo shares.

March 31: Anglo reports €12.7bn loss - the biggest in Irish history.

September 30: Central Bank says Anglo bailout could ultimately cost €34bn.



February 11: The Government says it will inject €7bn into Bank of Ireland and AIB in return for guarantees on lending, executive pay and mortgage arrears.

April 7: The late Brian Lenihan announces the creation the National Asset Management Agency (NAMA).

April 11: Outline of Greek bailout agreed by European Commission and IMF.

May 29: The Government injects €4bn into Anglo.

July: Then Central Bank governor Patrick Honohan makes ECB aware that from September, Anglo and potentially other Irish banks will be dependent on unguaranteed Central Bank Emergency Liquidity Assistance (ELA).

September 30: Dubbed 'Black Thursday' after Brian Lenihan admits taxpayers are facing a €50bn bill for the banks. A four-year budget austerity programme for the State is promised.

International investors fear the country cannot cope and bond yields rise dramatically higher.


Merkel and Sarkozy

Merkel and Sarkozy

Merkel and Sarkozy


October 18: German Chancellor Angela Merkel and then French President Nicolas Sarkozy (above) announce from their summit in Deauville that holders of European government debt must contribute to any future bailouts, heaping more pressure on Irish Government bonds.


Patrick Honohan

Patrick Honohan

Patrick Honohan


November 18: An editorial in the Financial Times speaks of a bank run in Ireland. Patrick Honohan (above) is interviewed about a possible bailout on RTÉ's Morning Ireland.

November 21: Brian Lenihan flies to Brussels to apply for a €67.5bn international bailout for the State.

November 28: 'Hell at the gates': The Irish bailout is agreed and includes punitively high interest rates, Troika oversight of public finances and a commitment to austerity. Repaying the vast bulk of bank debt - much now owed to the Central Bank - is a condition of the deal.

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