Ireland forced into new £21bn bailout by debt crisisIrish finance minister Michael Noonan said country had been left with an 'appalling legacy' as a result of the banking crisis
Larry Elliott and Jill Treanor
guardian.co.uk, Thursday 31 March 2011 21.17 BST
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Europe's debt crisis deepened on Thursday night as Ireland was forced into another €24bn (£21bn) rescue of its banking system and jittery financial markets pushed Portugal closer to a bailout.
In a furious attack on the previous government, the Irish finance minister Michael Noonan said the country had been left with "an appalling legacy: a legacy of debt, of unemployment, of emigration, of falling living standards and of low morale" as a result of the banking crisis.
After stress tests to assess the vulnerability of the banks to a drastic worsening of the economy, Noonan announced that the government would take a majority stake in all the major lenders. These are to be radically reduced in size and focused on just two players.
Ireland's banks have been crippled by the bursting of a house price and commercial property bubble, created when they took advantage of the country's membership of the single currency to lend recklessly on low interest rates. The collapse caused an economic crisis that has seen output shrink for three years in a row.
"We are now in the third year of the banking crisis. The previous government failed to act. They ducked and dived and procrastinated as they lurched from one crisis to the next. They went through periods of denial and periods of self justification. They paved the road to disaster with good intentions," Noonan said. "They never fixed the broken banks, however."
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