Abstract:

Starting in the U.S as a subprime mortgage crisis in the second half of 2007, the financial crisis gained a global character when Lehman Brothers went bankrupt in September 2008. Peripheral countries in the Eurozone especially were affected by the crisis since the global crisis turned into a sovereign debt crisis in those countries, particularly in Greece and Ireland. However, the reason why the crisis was felt so deeply in Greece and Ireland is that both countries already had problems resulting from country-specific factors.The reason for analyzing Greece and Ireland in this study is that they are the two most severely affected countries in the European Union by the financial crisis of 2008. However, during the period from their Euro accession to the outbreak of the crisis, both of these countries had high growth rates. Despite the high growth rates achieved, why did these two economies experience big problems because of the global financial crisis? Both applied for EU/IMF funds in order to overcome the crisis but their processes of overcoming the crisis were different. What are the underlying reasons for this? Did adoption of the Euro make these countries more vulnerable to the global crisis or did being within the Eurozone facilitate their process of overcoming the crisis? These are the main questions to be answered in this study

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