Q & A: Irish Finance explained

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29 November 2009, at 16: 28 GMT last updated further read the main story of the Republic of Ireland and the EU in 85bn help euro rescue package to tackle a huge hole in the public finances agreed.

As part of the package, the Irish Government has a savings program detailing four years tax increases and expenditure cuts produced.

How? the country into this mess

Celebrated as the "Celtic Tiger" for the fast growth of the economy, in the space of three years, that the Irish Republic of boom, bust of almost.

Much of the growth has been built to the real estate market. But, since 2008, this has a dramatic collapse, with house values fall suffered by 50-60%.

Bad debt have almost the country's banks, forcing the Government, she destroyed bail-out.

This opened a huge hole in the Irish Government finances - which see to this year run a budget deficit 32% of GDP.

Without taking into account the cost of rescuing the banks, the Government spending gap is considerable (and unsustainable) 12% of GDP.

A deep and painful recession caused a drastic deterioration in tax revenues and an increase in the unemployment insurance claims.

What's more, there are fears that the Government again has it cost-cutting measures in the recession, which could plunge it started, from climbing.

Insisting not the Irish Government had been that it needed bailouts for?

Yes, Dublin said until November 18, it was fully financed its spending without go to the markets, at least the middle of next year, which means revealed it to borrow more money.

You do this by issuing more bonds are IOUs investors effectively.

Many countries, the Irish Republic has seen, such as higher unemployment and lower tax revenues so why the Irish Republic issues for a Bail-Out?

The Government gave the Irish banks 2008 guarantee a ceiling at the height of the financial crisis.

But this Dublin on the hook for all the banks debts, the it value several times are the annual production of the Irish economy as a whole.

Losses at the banks mounted, ability to meet the guarantee so that she withdrew more money from the banks started foreign investors on the question of the Irish Government.

This left banks heavily dependent on the European Central Bank for the financing of emergency - something that the Central Bank and other European governments very uncomfortable made.

In addition, many are of the banks of Kreditgeber-, the guarantee pleasure - the big banks in other European countries, United Kingdom.

So it was down eventually, the other European Governments that accept Ireland a Bail-Out.

Already 10 billion euros for the Bail-Out cash his State is located in the capital reserve backed banks, with another 25 billion in reserve, for their use are provided.

The remaining 50 billion budget deal financing.

Where comes from the 85bn euro?

The money comes from:

the Irish Republic itself is 17.5bn euros to the entire Fund from its cash reserves and controversial, the national pension reserve Fund22. 5bn euro by the International Monetary Fund (IMF) one similar amount from the European Union European financial stability Mechanism17. Affirms the European financial stability contribute, which financed by eurozone Governmentsbilateral loans from United Kingdom, Sweden and Denmark.What are the possible consequences for the United Kingdom?

The United Kingdom has offered to a direct bilateral loans, the Irish Republic. The total contribution is expected to more than EUR 8 billion.

First, the United Kingdom is a direct loan for the banks euro contribute an estimated winter storm.

The rest comes from his contributions to the IMF and the European Union financial stability mechanism.

Chancellor George Osborne, said: "It is in Britain's national interest." "It is money we expect back fully preserved, and we think it helps to get Ireland back to a fully stable path to growth."

Less demand for UK would difficult times in the Irish Republic were and services of one of the largest trading partner of Britain's mean.

UK Government according to exceed trade with the country total UK trade with Brazil, Russia, India and China.

In addition, many UK banks have large exposures to the Irish economy.

The United Kingdom and the Republic are important trading partners what makes Dublin to sort your finances?

The Irish Government had already announced austerity measures and tax amounting to EUR 15 billion increase since the financial crisis of 2008.

On top of that, the latest strict four-year plan be reduced another 15 billion euros over four years.

These subscription orders include the euro in 2011 alone.

The Government had on its budget deficit 3% of GDP currently to have until 2014, by 12%. As part of the EU, Bail-Out have to reach them now to the year 2015 to this.

The Government also plans more shares in the banks, increased their capital - the buffer against future losses - to buy from 8% to 12% of their assets.

Is plan the implementation actually to get?

Junior coalition partner were to demands from its elections keep the Taoiseach, Brian Cowen, in January, after the budget is passed by 2011. But there are fears that the Government does not even last that long can.

All the Republic parties support the cuts in principle, but opposition parties do not agree on the details of where the axe should fall.

Why is the situation in the Irish Republic a concern abroad?

Other financially weaker members of the euro area such as Spain and Portugal are concerned about the risk of financial contagion.

Ireland have pushed into the arms of the IMF, panicky investors lose trust in their public finances.

Yields of Spanish and Portuguese long-term debt - a measure of how much the market would demand their governments borrow money - are trading close to of their highest levels since joining the euro area in the year 1999.

Such as Ireland Portugal has stretched public finances and a weak Government strongly.

The Spanish Government is in a better position. But its economy experienced a housing boom and bust almost as bad as Ireland, and there is great concern about the health of some of its banks.

You will take the Republic a EU Bail-Out in the hope that take it some of the heat from them is welcome.

But so far has not happened.