Second thoughts on Ireland

Irish political economy seems to be falling apart in front of our eyes and the bond market isn't so happy, even after Ireland accepted the EU/IMF bailout.  That would appear to be political risk.  Maybe there won't be a happy ending even in the short run.

Here is Thomas Friedman, a number of years back, touting the wonders of the Irish model.  Cato and Heritage made similar claims.  What are we to make of this broader span of Irish history?  I see a few candidate views, not necessarily mutually exclusive:

1. The Irish had some excellent economic policies, but they needed to regulate their banks more.  They were simply too optimistic and too sloppy.

2. Irish troubles could have been contained, at some point over the last two years, had Ireland not been on the euro.  They would have devalued, defaulted, and had a rapid bounce back up, within the next three years.

3. Ireland never should have guaranteed the liabilities of its banking sector.  Indeed, Ireland (as New Zealand did long ago) should have encouraged larger, more diversified foreign banks to dominate its financial sector.

4. Irish troubles are intimately connected with low corporate tax rates.  Revenue starvation induced the Irish government to court and tolerate a real estate bubble.  One claim is that Ireland relied too much on property taxes.

5. The good and bad policies are a bundle of sorts, and Ireland needed the mix to rise from squalor and the dominance of anti-commercial interest groups, no matter how painful the present day may seem.  I recall vividly, growing up, that Ireland was thought of as not much more than a Third World country.

6. We are overreacting to the Irish failure.  It is one of the first European dominoes to fall, but over time many different policy models will look like mistakes.

What other candidate views are there?