In just a few years, Ireland has gone from being the so-called Celtic Tiger to the most striking emblem of global economic bust. It is a humiliating reversal. The nation that struggled for so long to win its freedom from Britain has surrendered its sovereignty to the International Monetary Fund, the European Commission and the European Central Bank (ECB). The bailout, which will be in the order of €85bn (£72bn), will be followed by yet another austerity budget, this time imposed by foreign bureaucrats, that will further depress living standards. Some kind of independence, some kind of freedom!

George Osborne sought to present Britain's £7bn loan to Ireland as an altruistic gesture to a "friend in need", but in reality it was an act rooted in self-interest. As the Chancellor pointed out, we export more to Ireland than to Brazil, Russia, India and China combined. In addition, British banks have a £140bn exposure to the Irish debt - the largest in the European Union. Failure to act could have precipitated a second credit crisis in the UK.

Mr Osborne was right to come to Ireland's aid, but he cannot claim to have foreseen the crisis. On the contrary, in a notorious article in the Times in 2006, the then shadow chancellor lauded the Celtic Tiger as a model for Britain to emulate. He wrote: "Ireland stands as a shining example of the art of the possible in long-term economic policymaking". Had Mr Osborne been in power at the time of the 2008 financial crisis, he, like the Irish, would have denied the British economy the fiscal stimulus that prevented the recession from, in all likelihood, becoming a depression.

British Eurosceptics, eager to seize an opportunity to bash Brussels, have identified the euro as the source of Ireland's woes. But such wishful thinking ignores the fact that Iceland, outside the eurozone and free to set its own interest rates and devalue its currency, failed to avoid a similar fate. Once the crisis began, membership of the euro became a crucial safety net for Ireland. Had it not been for emergency finance from the ECB, Irish banks would almost certainly have collapsed last year.

But if Ireland's economic model has been discredited, its political class has been disgraced. For weeks, the Irish Taoiseach, Brian Cowen, insisted that his country was "fully funded" and denied, against all evidence to the contrary, that there were bailout talks with the EU. The prime minister must now resign and an immediate general election should be called, one in which his party is likely to suffer a historic defeat.

The crisis has shone a light on the revolving door that operated between Fianna Fáil and the construction industry. Under successive governments, Ireland became the plaything of a crony capitalism that neglected the public interest in favour of a golden circle of banks, property developers and state bureaucrats.

In its bid to attract inward investment, the country became a virtual tax haven, leaving it ever more dependent on revenues from the building industry. At the height of the boom, construction accounted for a fifth of the economy and house prices rose 520 per cent between 1994 and 2006. When the property bubble burst, the state was left with no way to finance its debts.

The Irish public is experiencing an extreme form of what the Harvard philosopher Michael Sandel has called "bailout outrage". The arrogance of the country's complacent elite was typified by the former chief executive of Anglo Irish Bank, Seán "Seanie" FitzPatrick, who denounced bank regulation as "corporate McCarthyism". His bank has been bailed out to the tune of €34bn. But while Fianna Fáil will pay dearly at the ballot box, it is Ireland's ordinary workers who will continue to pay the economic price.