At the outset of the crisis the Irish banking system consisted of two parts: International and Irish banks. The "irish" banks did get in trouble and had to be rescued because of the housing bust: Mortgages, breakdown of the construction sector. The international banks had not be rescued with the exception of depfa and here Ireland was for once lucky: depfa was still a german problem.

Now in 2008 there was  a high exposure of international banks to Ireland. Some of it was to multinationals based in Ireland: I think we can agree that this exposure is not the problem. Some of it was to the international banks in Ireland: Not the problem either.

Problematic was and is the exposure to the "Irish" banks. But of course all banks have cut back their exposure now for over two years.

The losses of the "Irish banks" did first eat up the capital, so owners did get wiped out. Then the Irish State had to pay. Creditors on the other hand, depositors, bondholders, other creditors escaped scot-free.

Because the losses of the banks were to big, the credit of the Irish state is now in trouble too. Now the question is, why the creditors of the banks don't have to take some losses too. That means the bond-holders but not the depositors or at least not the smaller depositors.

Now my theory is that there are not many private bond-holders left. They have used the last two years to get rid of their credits to Irish banks. The obligations of the Irish banks have shifted to the Irish state and the ECB.

So a default of the troubled Irish banks or the threat of a default is no longer advantageous to Ireland.