To begin with, banks lack expertise to assess investment in new fields, suffering as they are from problems with non-performing loans and under-investment in their loan officers’ human capital. Consequently banks do not lend. This means that new investments and new enterprises cannot get funding, and thus new markets falter.
As Figure 10 shows, following the onset of the crisis in 2007, Ireland has experienced very large public deficits and a rise in the ratio of public debt to GDP from 25% in 2007 to 105% in 2011.