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How big is our deficit? And how does debt relate to deficit?

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  • 01-11-2011 4:42pm
    #1
    hatrickpatrick
    Registered Users Posts: 17,797 ✭✭✭✭


    How big is our deficit at the moment, in billions and as a % of GPD?
    And also, how does it relate to debt? My understand is that a deficit means you're spending more than you're taking in, and that you can be in debt but not have a deficit is your revenue exceeds that particular year's debt repayment. Is this correct?

    And based on the information above, how significant is this extra 3.5 billion we've just discovered we have, in relation to bringing the deficit down to 3% of GDP?


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    #2
    fliball123
    Registered Users Posts: 7,445 ✭✭✭fliball123


    http://www.askaboutmoney.com/showthread.php?t=151295

    Have a look at this


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    #3
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    hatrickpatrick wrote: »
    How big is our deficit at the moment, in billions and as a % of GPD?
    And also, how does it relate to debt? My understand is that a deficit means you're spending more than you're taking in, and that you can be in debt but not have a deficit is your revenue exceeds that particular year's debt repayment. Is this correct?


    Deficit is what happens when the amount of money spent is greater than the amount of money earned - an overdraft at a national level.

    Debt is deficit accumulated over a period of time (years). So yes you can have a surplus but still have debt edit - due to previously accrued borrowings.

    So to answer your 1st question, as of 30/9 the total exchequer deficit so far for 2011 is €20.659 billion.

    GDP is expected to be approx €156 billion. Based on those figures the exchequer deficit is 13% of GDP.
    hatrickpatrick wrote: »
    And based on the information above, how significant is this extra 3.5 billion we've just discovered we have, in relation to bringing the deficit down to 3% of GDP?

    It lowers the amount of interest repayable (by up to 300m depending on who you believe). It makes it slightly easier, but not much, to hit the deficit reduction targets. How much easier depends on when the debt is to be repaid (i.e. is it 1/2/5/10 year bonds and when do they mature or a promissory note for the banks).


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    #4
    cjgib
    Closed Accounts Posts: 56 ✭✭cjgib


    http://www.golemxiv.co.uk/2011/10/growth-through-austerity-an-irish-update/

    This is startin to scare me!!


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    #5
    Debtocracy
    Registered Users Posts: 208 ✭✭Debtocracy


    Normally only the interest part of the debt is relevant to the deficit. The principal part of the debt is usually rolled over with new debt. However, if a country does not have access to debt with a sustainable interest rate, the country now has to pay the principal part of its existing debt, and this will influence the deficit. The relation between debt and deficit will become particularly clear in the case of the Italians. They have a relatively small deficit but if they cannot access new debt to roll over the principal of their debts, they and the Eurozone are screwed.

    The strategy of consistently rolling over debt will ultimately fail. It requires an exponential growth of credit but the Germans are not keen on excessive money printing. If the Eurozone is to be saved, expect Greece-like defaults among the Southern states.


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    #6
    Taxi Drivers
    Registered Users Posts: 182 ✭✭Taxi Drivers


    hatrickpatrick wrote: »
    How big is our deficit at the moment, in billions and as a % of GPD?
    And also, how does it relate to debt? My understand is that a deficit means you're spending more than you're taking in, and that you can be in debt but not have a deficit is your revenue exceeds that particular year's debt repayment. Is this correct?

    And based on the information above, how significant is this extra 3.5 billion we've just discovered we have, in relation to bringing the deficit down to 3% of GDP?

    See the last page of this DoF document from April. The 2011 deficit was expected to be €15.7 billion, equivalent to 10.0% of GDP.

    Deficit is a flow measure, while debt is a stock measure. Deficit measures flows of revenues and expenditures. Debt measures total amount of accumulated borrowings.

    The extra €3.6 billion has no impact on the deficit. None whatsoever. It was just an error in adding up our total debt. The same €3.6 billion was added twice.

    There is absolutely no change to deficit. Our interest bill is unchanged. We are still paying interest on the €3.6 billion. Another €3.6 billion was added to our debt in error. We were never paying interest on that so we cannot have saved the interest on it - it only ever existed in the accounts of the DoF.

    There is no change to pain needed to achieve the 8.6% deficit target.


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