EU Membership Caused our Banking Crisis, says Reza Moghadam

April 25, 2012 Updated: October 1, 2015
The International Monetary Fund (IMF) headquarters in Washington DC
The International Monetary Fund (IMF) headquarters in Washington DC (Yuri Gripas/AFP/Getty Images)

Ireland’s membership of the EU was a factor in causing our current indebtedness, according to Reza Moghadam, Director of the International Monetary Fund’s (IMF) European Department.

That’s according to a survey result posted on the IMF website, which said that “a build-up of debt after joining the eurozone led three very different countries to the doors of the International Monetary Fund, as the global economic and European debt crises took their toll on the Greek, Irish, and Portuguese economies.”

According to the statement “the head of the IMF’s European Department and the mission chiefs responsible for Greece, Ireland, and Portugal gave a candid assessment of the varied challenges facing these countries and the paths they are pursuing toward recovery,” during the global lender’s Spring Meetings in Washington, DC. 

Mr Moghadam noted that all three countries have very different circumstances behind their current troubles, although there was a thread that linked them all – “the welcome decline in interest rates that came with euro membership unfortunately also resulted in a rapid increase in indebtedness, and how competitiveness suffered,” stated the IMF release.

It is the IMF’s belief that, “In Ireland, private sector borrowing boomed, especially for real estate, leading to a banking crisis when the country’s housing bubble burst,” leading to “sharply rising public debt as a consequence of bailing out the banks.” 

The above issues, according to the IMF, shut countries such as Ireland out of financial markets and “stifled their economies.”

“The focus of our programmes has been to put in place the conditions for growth in the long run,” said Mr Moghadam.

“Each country’s programme is designed to curb debt and boost growth, and provides financial help until a return to market borrowing is possible,” stated the IMF.

The IMF also noted that they would “continue to work with these countries and adapt these programmes as circumstances evolve.”