Madrid and Dublin were running a budget surplus going into the market meltdown in 2008, as the graph* below demonstrates. They were much more fiscally cautious than the eurozone average – even more so than virtuous Germany.

…And why did it change? Contrary to what Schauble says, it wasn’t “excessive state spending”, but a collapse in tax revenues in both countries as massive property booms in both countries turned to giant bust. And the Irish public finances have been ruined by their decision to bailout their banking sector.