Irish authorities misjudged banking risks, leading economist tells inquiry
Ireland misjudged risky behaviour by banks and international institutions before the collapse of its financial system, an expert has told an inquiry.
The government guaranteed the nation's ailing banks in 2008 in the belief that they were stable - a decision which eventually led to a €64bn (£51bn) rescue of the financial system and an international bailout of the state.
It followed a massive property price bubble enabled by banks borrowing from international money markets then lending to investors who swelled public coffers through housing taxes.
That produced higher wages and costs, former IMF economist and Finnish government banking official Peter Nyberg told a parliamentary investigation, until overstretched banks were nationalised to prevent them running out of money and the international community intervened with emergency loans.
He added: "Judging by the consequences, which were larger in Ireland than anywhere else, the Irish institutions were pretty good at misjudging risk internationally."
A parliamentary committee in Dublin is looking at banking, regulation and crisis management by Irish authorities, before publishing a final report in November.
Mr Nyberg was questioned by a group of 11 legislators on his 2011 government-commissioned report into the crisis.
The Joint Committee of Inquiry into the banking crisis is expected to hear from major international institutions.
Joint Committee chairman Ciaran Lynch said: "It is an opportunity to shine a light on a dark and painful recent time in our past, an opportunity to piece together the events of that time, an opportunity to learn from the mistakes that were made and an opportunity to ensure that those mistakes are not repeated."
The rescue package from the EU and IMF came with a range of austerity conditions.