The Irish economic crisis has not been without its moments of humour.

By way of explaining the plight of Ireland's crippled banks, which have rendered his nation insolvent, then-prime minister Bernie Ahern tried to divert blame from his government's lax financial regulation to the global banking panic of 2008. That meltdown was triggered by the collapse of New York investment bank Lehman Brothers Holding Inc.

“Lehman's was a world investment bank,” said Ahern, a reliably quotable PM during his 11 years in office, ending that same fateful year of 2008. “They had testicles everywhere.”

Neither has the crisis lacked for irony.

For the Irish, this turns on how their nation was somehow able to break free of centuries of economic stagnation for a fleeting 15 years, beginning in the mid-1990s, only to emerge from “Celtic Tiger” status more destitute than before its gigantic banking and construction bubbles burst in 2008.

For Canadians, the irony lies in Finance Minister Jim Flaherty, while pitching his first budget in New York in 2006, responding to a question of what Canada would look like after five years of Conservative government.

“It will look more like Ireland,” said Flaherty, proud of his Irish heritage. “More dynamic, more attractive to investors, brighter, more positive, outward-looking.”

It's disturbing that so ill-judged an assessment would be made by, of all people, our finance minister at the very peak of Ireland's unsustainable boom. And that he would incorrectly attribute an Irish prosperity, which in historical terms has amounted to a flash in the pan, almost solely to an Irish policy of extraordinarily low corporate tax rates.

Five years on, Ireland is effectively bankrupt. Mired in recession, it is suffering a 14.6 per cent jobless rate. As other nations have emerged from the Great Recession, Ireland is forecast to endure a 1.6 per cent decline in economic growth this year, and to grow by only 0.3 per cent next year and 1.4 per cent in 2013. So parlous are the nation's finances that one credit-rating agency places Ireland in the Third World company of Venezuela and Iraq as nations most likely to default on sovereign debt.

Having unwisely agreed not long after Flaherty's unwarranted praise to guarantee the losses of its feckless banks, Ireland is now on the hook for a staggering $369 billion (U.S.) in past and likely future cash injections to cover the banks' spectacular losses, aside from the state's own swollen debt. To put that sum in perspective, Irish GDP in 2010 was $164 billion.

Ireland has lost a significant measure of sovereignty. Dating from a $89 billion bailout of Eire in November, jointly by the European Union and the International Monetary Fund, Dublin has required the approval of the EU and the IMF for everything from a planned $9.6 billion job stimulus program to feeding the black hole of Irish banking losses.

A new coalition government has just unveiled the toughest austerity measures in Irish history.

The harsh measures include steep hikes in personal tax rates and deep cuts in government services. Dublin also has begun a fire sale of state assets, including power and water utilities, tracts of forest, ports and telecom networks.

The origins of the short-lasting euphoria still aren't known. Of the “Celtic Tiger,” Irish historian R.F. Foster has written: “It appeared like a miraculous beast materializing in a forest clearing, and economists are still not entirely sure why.”

What we do know is that Ireland's race to the bottom in becoming a European corporate tax haven had little to do with Eire's brief hyper-prosperity. After all, Ireland's thriving export trade plateaued in 2000. And when branch-plant defections began, the likes of Dell Inc., the Texas-based PC maker, relocated to Poland, a jurisdiction of low wages, not low corporate tax rates.

Economists are loath to attempt to measure the job-creation impact of corporate tax rates. Common sense tells you there can't be much of a connection between the two if Germany, by far the healthiest European economy, imposes a rate of 30 per cent to Ireland's 12.5 per cent. There are simply too many factors guiding business decisions to suss out the influence of federal tax rates on corporate profits.

And Ireland is a prime example. When Eire set out to join the economic major leagues, in the 1990s, it eliminated protectionist trade barriers. Its economy also was greatly boosted by membership in the EU and later the eurozone nations that share the euro currency.

Ireland also granted free public education to its people, nurturing one of the world's most skilled workforces.

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There's a demographic factor, as well — a huge increase in the ratio of working-age to non-working-age Irish that followed Dublin's 1979 decision to decriminalize birth control.

In hindsight, Ireland was no Celtic Tiger.

It was a Ponzi scheme in which the Irish spent much of the 2000s speculating on Irish property — buying and selling Ireland itself, over and over, at steadily rising prices in the expectation that prices would keep rising forever.

Developers built more houses and commercial property than there were Irish to occupy them.

With the collapse of Lehman in September 2008, doubt was cast on banks worldwide.

Irish euphoria turned to panic, real estate borrowers began reneging on debt, Irish bank failures thus loomed absent a massive state bailout, and Ireland joined Greece and Iceland as a ward of the EU and the IMF.

Unsustainable booms that will end in tears are not difficult to spot. In the months prior to the dot-com bust of March 2000, day traders at my local doughnut shop were flipping Nortel shares on their cellphones.

Michael Lewis, author of Liar's Poker, discerned what should have been a warning sign in talking with Joan Burton, a Labour MP who said with pride: “Do you know that Irish people are now experts on bonds? Yes, they now say 100 basis points rather than 1 per cent. They have developed a new vocabulary!”

When everyday people are watching interest rates that intimately, making impulsive calculations of whether they can finance the flipping of a house or strip mall, that's your warning that things have gotten out of hand.

Yes, our collective vocabulary has expanded, of necessity, to include “subprime mortgages,” “collateralized debt obligations” and other instruments that Warren Buffett famously calls weapons of mass wealth destruction.

And now, what the Irish might give to have never heard of a basis point.

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