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Ireland's banks have been hard hit this year, and especially yesterday, though the New Ireland Fund (NYSE:IRL) is up 6% in trading this morning.

John Murray Brown of the FT reported from Dublin that Ireland’s banks suffered yesterday their biggest one-day fall in share price for two decades on Monday as fears swept the Dublin market about their ability to withstand the downturn in the Irish economy amid the global financial turmoil.

The benchmark ISEQ index tumbled 13%, extending its loss this year to 52.5% – the biggest decline in 2008 by a big European bourse. IRL is roughly trading at just 1/3 its high achieved less than a year ago.

Anglo Irish Bank (OTC:AGIBY), the specialist property lender, plunged 45% (it has recovered 3/4 of that loss so far today), while Allied Irish Banks weakened nearly 16% (AIB) (recouped today) and Bank of Ireland (NYSE:IRE) lost 15% (up 10% today).

“Everyone has been spooked . . . investors have turned their guns on the next country which is seen to have issues to deal with and that is Ireland,” said Eamonn Hughes, banks analyst with Goodbody stockbrokers.

Ireland's Celtic tiger economy was just a year ago the envy of the European Union with strong and consistent growth. However, with its construction and property markets in deep decline, last week it became the first country among the 15 members of the euro single currency to declare it was officially in recession.

Source: Ireland's Ailing Banking Sector