, over - simplified approaches to assessing fiscal vulnerability, and a formulaic and credulous approach to bank solvency and bank credit risk, created risks that are still being worked through. although the denouement revealed the source of the problem to be relatively obvious, it has been less easy to pinpoint the behavioural flaws ( in the behaviour of lenders, regulators and borrowers ) that prevented enough of them from foreseeing the risks and mitigating them. some of the differences are attributable to the prevailing international economic environment – always crucial for as open an economy as is that of ireland. some are due to the degree to which the pre - crisis economy had become distorted before the crash. the distortions were surely much greater in the recent case because of ( i ) the heavy concentration in the boom phase on the construction sector ( reflected in the sharp fall in male employment ) ; ( ii ) the skewed reliance of the public finances on volatile sources of tax revenue ( this resulted in a sharp and unforeseen loss of tax revenue when the boom ended ) ; and ( iii ) the grossly imbalanced private sector portfolios, which triggered a wave of progressive losses of confidence, one of the earliest of which triggered the serious bis central bankers ’ speeches unforced policy error of enacting an all - embracing blanket banking guarantee, and a later one ensured that the authorities had no alternative but to seek funding from official sources including the imf. while the macroeconomic adjustment of the economy in both cases shared common features : re - balancing of the public finances using both tax increases and spending cuts, the adjustment in the more recent case began sooner and was being accomplished more quickly. this may be attributed to the loss of international confidence forcing the government ’ s hand in line with the adjustment programme agreed with the official lenders. wage competitiveness was also a central element in the adjustment process. this was helped in the 1980s by the new weakness of the currency regime relative to that of the largest trading partner ( the uk ), and by the ability, exercised in 1986, to make a significant but one - off devaluation, which was an option that was not available in the euro area. an additional feature of the later crisis, less significant in the earlier case, is the impact of the boom and bust on wealth and debtor positions. part of this is widely discussed, namely the widespread presence of households with negative housing equity, the financial and

peak of a house price boom ; equities also peaked in that year, but these peaks were small relative to what happened in the 2000s. real house prices hardly moved up before 1977 and then only by about 25 % total. likewise they didn ’ t dip much below the 1970s median. in the 2000s, the house price bubble ( even though starting from a much higher plateau in real terms than that of the 1970s ) was very large and was accompanied by record levels of construction. interestingly, five years after the crash, house prices had turned well before bis central bankers ’ speeches reaching the historical average in real terms. ( has the low euro nominal interest rate regime permanently lifted equilibrium house prices? are real costs of construction permanently and unavoidably higher? or are prices still elevated relative to their likely long - term trend? i won ’ t speculate further. ) equity prices also fell sharply ( especially banking equities on which some older middleincome people were relying for dividend flow to sustain living standards ). the bursting of the bubble has had other long term wealth distributional effects. ( d ) public debt : slow build - up in the 1980s, sudden jump in the 2000s here the contrast in dynamical sequence is quite interesting. the 1980s crisis was characterised by a slow but steady accumulation of debt during the crisis containment phase until the political logjam was broken and decisive corrective fiscal action was taken. indeed, debt had not yet got seriously out of line when the crisis began to be tackled, albeit too tentatively, in 1981. it is relevant that most debt was domestic and in local currency. this contributed to limiting fears of default, 2 and indeed permitted successive governments to defer decisive adjustment until the debt ratio crept up to the vicinity of 120 % of gdp. in contrast, in the more recent case, public debt was falling until just before the crisis was identified and containment began. then it started growing rapidly ( even before the banking debt was taken onto the books ). the debt at that stage was almost all held by non - residents and, of course, none in a “ domestic currency ”. the sudden and belated international awareness of the scale of banking losses being crystallised onto the government ’ s debt during the third quarter of 2010 contributed strongly to the rapid loss of international market confidence in the weeks that followed, leading to the application for financial assistance from the imf and eu. iii. concluding remarks every crisis is different, and we have shown