Whatever happened to Ireland?

Ambrose Evans-Pritchard is back on track with Ireland demands debt relief, warns on EU treatiesThe Irish government has suddenly complicated the picture by requesting debt relief from as a reward for upholding the integrity of the EU financial system after the Lehman crisis, though there is no explicit linkage between the two issues.

Ronan Lyons submits:It is hugely ironic that President Sarkozy called last week for Ireland’s corporate tax rate to be increased, as some sort of quid pro quo of the EU-IMF loan to Ireland. It is ironic, because it completely misses the point of who’s doing who a favour.

Kurt Brouwer submits: If you have been wondering what the heck is going with Ireland, it is a sad yet familiar tale. The government of Ireland thought it could repeal reality by bailing out its improvident banks. Amazingly, the Irish government guaranteed all the liabilities of the banks. I really don’t get the rationale for that, but one unwise decision leads to others. Now, the Irish have agreed to a bailout of their cash-strapped government.

It's getting worse.  Here is one bit: The other crumbling dam against mass mortgage default is house prices. House prices are driven by the size of mortgages that banks give out. That is why, even though Irish banks face long-run funding costs of at least 8 per cent (if they could find anyone to lend to them), they are still giving out mortgages at 5 per cent, to maintain an artificial floor on house prices. Without this trickle of new mortgages, prices would collapse and mass defaults ensue.

The Irish economy is back in focus for investors across the world, after the former Celtic Tiger extended guarantees to its banking industry and depositors.