Now for Portugal, then perhaps Spain and Belgium, with a saver on Italy after Ireland was saved this morning.

The question now is whether markets will turn on the P in the PIIGS and destabilise Portugal to the point where it needs a support package like Greece and now Ireland.

One hundred and ten billion euros for rescuing Greece, €80 billion to €90 billion for aiding Ireland, which has already cut deeply into spending and budgets, but couldn’t manage similar cuts to its damaged banks, which has brought the country undone.

So it has been forced to ask the rest of Europe for help in a sort of ritual of the inevitable.

“In the context of a joint program EU/IMF, the financial assistance package to the Irish state should be financed from the European financial stabilisation mechanism (EFSM) and the European financial stability facility (EFSF), possibly supplemented by bilateral loans to be negotiated by EU member states. The United Kingdom and Sweden have already indicated today that they stand ready to consider a bilateral loan,” the statement from the rescuers said said.

“EU and euro-area financial support will be provided under a strong policy program which will be negotiated with the Irish authorities by the commission and the IMF, in liaison with the ECB.”

And why did Ireland need help?

Well, while it is cashed up at the moment, it has been shut out of capital markets for a month or more now, and that meant it wouldn’t be let back in until something had changed, in the eyes of investors.

That something is the aid package, which will be used to backstop the economy and the government’s restructuring of its broken banking system.

So just as in 2007, Ireland’s banking crash forced the government to underwrite and guarantee it (thus forcing many other governments around the world to follow suit), so the final act in that rescue, the prospective collapse of those banks and Ireland in 2010 or 2011, has forced Europe to guarantee Ireland.

And why, well the maths are simple:

The two largest creditors to Ireland are the UK and Germany, with loans outstanding of $US149 billion and $US139 billion respectively.

An Irish bank default would have damaged the German and British banking systems directly, and required significant domestic bank bailouts.

Seeing the UK banking system is dominated by the government (controlling two majors in RBS and Lloyds), the credit standing of the UK would have been questioned, at a time when the government is about to start a massive austerity program. Savings the banks for the second time in three years and cutting spending would not have worked.

In more powerful Germany, where sentiment remains sceptical of the bailouts, the government would have had to backstopped many of its banks (it controls at least two majors at the moment).

That would then have seen Portugal pushed up to the block to have an axe raised over its neck.

And in turn that would have threatened Spain, which is the major creditor to Portugal with a total of $US78 billion in loans, bonds, etc, at risk.

But don’t feel for Ireland or blame the nasty euro or those Germans or the French.

Like Greece, Ireland’s problems were of its own making.

Greece lied and fiddled its way into the eurozone and continued doing it until the string ran out and the country’s financial lies caught up with it. That was done at the connivance of governments, business and many advisers (including the likes of Goldman Sachs and other familiar names).

While Ireland was cleaner, with sensible economic policies about tax, foreign investment and confidence and the like, it had a lousy, and corrupt (certainly incompetent) culture of entitlement among its business class, supported by regulation of the banks and business that failed to understand where the line should be between healthy business drive, self-interest and enrichment.

The rigidities of the eurozone and euro may have played some role in creating the conditions for the mess to happen, but to all intents and purposes, this was a home-grown failure.

Ireland was a pin-up country for modern economic theory and practice, and it failed.

But don’t believe that it failed because of the euro or the failure of modern market theory.

Successive governments allowed the banks to raise money (and allowed endless numbers of financial groups, large and small to take advantage of Ireland’s pro-business, low tax regime) and go hell for leather.

All the banks, to varying degrees were not supervised adequately, let alone competently.

Loans to the CEO (who then became chairman) of one of the big three banks were routinely hidden from auditors twice a year by shifting them off to the balance sheet of a competitor with a nod and a wink between the managements and boards of both.

Hundreds of million of dollars of loans were made to board members and other insiders with no security, hundreds more were advanced by one bank to support its share price. The money (more than €400 million euros, all lost) was lent to buy a 10% stake held by a Dublin businessman who had accumulated the stake in secret.

Billions more were lent to build housing financed in a mortgage boom, more money was lent unsecured, or on the basis of poor security and no checks to build commercial property, more was invested in stockmarket plays and self-enrichment schemes.

And while this merry game was unfolding across the decade, the central bank and the financial regulator slept, just as the Bank of England and the FSA in London slept while a similar boom in banking happened in the UK.

It failed because at best the regulators and Ireland’s government was incompetent and duchessed by the spivs, thieves and blarney stone kissers that dominated the Irish business community in the late ’90s and in the years of last decade leading to 2007 and the near collapse.

To an outsider in Australia, there were a couple of warning bells. Babcock and Brown set up a subsidiary or two and raised a lot of money in Ireland (low tax and entry into the eurozone) Macquarie Bank had a small business there that did a lot of work in Europe. James Hardie, the asbestos fleers went to Holland, but have now ended up in low-tax Dublin.

Even blue chips were attracted to Ireland; Perpetual established an international funds management business in Dublin that went nowhere and cost millions of dollars to run, simply because of the low tax and attractive business climate, which was destroyed by the incompetent regulation (also known as the “light” touch).

A few weeks ago Bloomberg revealed how Google was using Ireland’s low tax rate to shovel profits and revenues around Europe and back to America, virtually tax free into its profit and loss account. And when it looked like the 12.5% tax rate might fall victim to the just announced rescue and be increased, guess who moaned in America? Google.

Finally, the biggest warning bell about Ireland’s broken banks was contained in the collapse of a small operation called Depfa, which was based in Dublin and collapsed in October 2008.

HRE had bought it in March 2007 for about €7 billion and yet it collapsed in a matter of days. That triggered the fall of its parent, HRE, a big German mortgage bank, which became Germany’s biggest GFC-related failure with the  German government injecting more than 100 billion euros into HRE, saving it from collapse and then nationalising it in 2009.

No one in  Ireland or Europe wondered at the time how this failure could bring down one of Germany’s largest mortgage banks. It was a combination of poor lending, short-term financing of a long-term loan book (which included loans to infrastructure projects in Australia, such as the failing Brisbane Motorway). Depfa was bled dry in hours, the CEO resigned on a Friday night and the bank failed by Sunday.

It was effectively bailed out by the German government when it saved HRE.

Up to this morning’s announcement, the Irish government had promised or injected about €50 billion to save its dodgy banks, but there was no certainty that that was enough.

It was that feeling (along with the loss (in an electronic run) of nearly €25 billion of corporate deposits, mostly from August to October) brought Ireland and its broken banks to their knees earlier this month and forced it to ask for help.

Ireland’s government is now effectively broke, its reserves stripped by the broken bank system. It is the biggest victim of the GFC, especially if you add in the costs like the failure of HRE in Germany.

If the rescue package is around €80 billion, added to the problems caused in Germany and other countries directly (and ignoring the costs of the bank guarantees Ireland forced the UK and Australia to introduce), the incompetence shown in Ireland up to 2007 had probably cost over €200 billion, a sum that exceeds the annual GDP of the country.

But don’t blame the euro alone, or economics or free markets. Blame incompetence in government and regulation and greed and self interest in the banks and among their business clients.