What happened? Well, a government with strong financial and personal links to developers failed to stop rapidly increasing house prices - they were probably frightened to, as construction was 45% of the economy in 2007 when this tipped over the edge.

The developers were borrowing heavily, mainly from one bank with just 40 depositors, Anglo Irish. Anglo Irish was borrowing the money to lend from big European and American banks (including the Landesbanks - state-owned banks - in Germany).

These superbanks don't appear to have performed due diligence (made sure that the loans were being made on a sound basis).

When the American bubble popped, with the crash of Lehman Brothers and the subsequent crash of the subprime lenders who had lent money to poor people who couldn't pay, a whole series of international loans started unwinding.

Credit stopped being available in Ireland, and the construction industry - developers, builders, plumbers, architects, suppliers, electricians, little shops selling breakfast rolls and coffee, etc, etc - just screeched to a halt. Thousands of people were on the dole within weeks. Hiding the true extent of this was the fact that anyone who could afford it went back into education to 'requalify', and anyone with a spouse rapidly disappeared off the 'live register' of people being paid relief.


In the latest disaster, the Irish banks, which were propped up by massive funding from the citizens last year, turned out to have been lying in their teeth about the extent of their exposure (bad loans). Good money has been poured after bad. The French, British, Germans and Belgians are terrified that the Irish crash, by "contagion" is going to infect banks in other vulnerable countries.

The big dread is that Spain may fall, which could bring down the whole interlinked euro economy.

Clear now?