It is believed by some observers that the banking system needs to be scaled back, as it had become too large over the past decade (Brennan & Doyle, 2010). The country has also cut back its government spending in an effort to assuage markets, but the markets viewed the austerity measures are harming the country's chance to rebuild its economy, so the austerity measures failed.

Ultimately, the overheated asset prices that are hurting Ireland's economy cannot be dealt with effectively with the common currency. The euro does not have effective mechanisms for dealing with such crises, and Ireland does not have sufficient influence over the euro to enforce any mechanisms that there are. Euro policy is typically dictated by Germany and France rather than the small economies within the Eurozone. Exhibit a shows the U.S./Euro exchange rate history for the past five years.

Ireland is an export-driven economy that maintains...
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