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Irish 2009 deficit biggest in the EU

  • 23-04-2010 02:24PM
    #1
    Registered Users, Registered Users 2, Paid Member Posts: 24,612 ✭✭✭✭


    Cost of debt servicing to rise to 20% of GDP? Time to call in the IMF?
    RTE wrote:
    Ireland officially recorded the biggest government deficit in the EU last year. Revised figures published today by the EU's statistics agency Eurostat show Ireland's deficit for 2009 at 14.3% of GDP - higher than Greece and Britain.

    Until now the government deficit has been shown at 11.8%, but Eurostat and the Government have agreed that the €4 billion injected into Anglo Irish Bank can no longer be regarded as a financial investment, but must be recorded as capital spending, and included in the deficit. The €4 billion spent on Anglo was equivalent to 2.5% of GDP.

    Under the bank recapitalisation scheme announced recently, the Government will issue a promissory note to add a further €8.3 billion to Anglo's balance sheet over a ten-year period starting next year.

    AdvertisementIt is not certain how this will be treated in calculating the deficit in the future. One option is to record the money as it is spent as part of the deficit. The other is to add the whole amount - equivalent to more than 5% of GDP - to the deficit in a single year. If it were done this year the deficit would be around 17% of GDP.

    The interest rate to lend money to Ireland moved higher on news of the EU figures. The rate or yield on bonds moved up to 4.787% this evening. Yields on bonds from Portugal and Greece also rose.


    In the revised list of deficits published today, Ireland comes first at 14.3%, then Greece at 13.6% (after a sharp upward revision following a visit by Eurostat inspectors), then the UK at 11.5%. The lowest deficit was in Sweden at 0.5%.

    Today's change is a technical revision, as it does not involve any new borrowing or spending by the Irish Government. But it will disappoint the Government as it returns Ireland to the top of Europe's list of problem economies.

    'There is no additional borrowing associated with this technical reclassification,' Finance Minister Brian Lenihan said in a statement. 'This is a once-off impact.' He said the underlying deficit was 11.8% of GDP, broadly similar to that projected in December's Budget.

    But Fine Gael spokesperson for Finance Richard Bruton, speaking on RTE radio, described the comments as 'nonsense', and said the measurement showed the Government would have to raise taxes or cut expenditure in future budgets.

    '14% of tax going to pay off debt'

    About 14% of all taxes collected this year will go to pay for the national debt, the chief executive of the National Treasury Management Agency has told the Oireachtas Public Accounts Committee.

    John Corrigan said that, as interest rates were rising, the NTMA expected that cost to rise to about 20% of tax revenue. He said that in the past, the cost of servicing the national debt had been about 26% or 27% of tax revenue.

    Mr Corrigan said the national debt was expected to rise to €94 billion by the end of this year, and to €112 billion by the end of 2011, from just over €50 billion at the end of 2008. He said the cost of servicing the national debt this year would be about €5 billion.
    Original Article: http://www.rte.ie/business/2010/0422/budget.html


Comments

  • Closed Accounts Posts: 290 ✭✭alias141282


    Sleepy wrote: »
    Cost of debt servicing to rise to 20% of GDP? Time to call in the IMF?

    Original Article: http://www.rte.ie/business/2010/0422/budget.html


    The economic perfect storm has just got worse again. I would bet money (if I had it) on Ireland having to go to the IMF within two years. We're next after Greece.


  • Registered Users, Registered Users 2 Posts: 13,227 ✭✭✭✭jmayo


    The economic perfect storm has just got worse again. I would bet money (if I had it) on Ireland having to go to the IMF within two years. We're next after Greece.

    Not necessarily so.
    Spain or Portugal might get there before us and there is no way the Germans can afford to bail Spain out.

    This could be the beginning of the end of the grand European dream.
    One single currency is actually going to make the situation much worse since they can't devalue.
    Also strong economies like Germany are going to be dragged down by the inept corrupt ones like Greece and ourselves.

    I do agree we are IMF bound, because we just can't keep our current deficit going as it is and then add in billions for corrupt bank bailouts on top.

    I am not allowed discuss …



  • Banned (with Prison Access) Posts: 792 ✭✭✭Japer


    jmayo wrote: »
    I do agree we are IMF bound, because we just can't keep our current deficit going as it is and then add in billions for corrupt bank bailouts on top.

    Not to mention the government paying ( and pensioning ) its own employees still way too much eg average pay of a Guard in this little country is 60k, which is not much short of the 80 k I heard of some brand new houses being sold for recently. Where else in the world can the average cop earn nearly as much as a new house is worth ? Our average cop ( like in Ballinascully ) is not exactly overworked or does not exactly face the most dangerous / worst conditions in the world.


  • Banned (with Prison Access) Posts: 6,485 ✭✭✭Denerick


    I suppose we'll have the public sector workers and the Labour party on the streets in no time, loudly announcing their refusal to cut public spending and screaming their alternative, which I'm sure is somewhere underneath all the paperwork...

    Feck this, I'm off to London.


  • Banned (with Prison Access) Posts: 792 ✭✭✭Japer


    Denerick wrote: »
    I suppose we'll have the public sector workers and the Labour party on the streets in no time, loudly announcing their refusal to cut public spending and screaming their alternative, which I'm sure is somewhere underneath all the paperwork...

    Feck this, I'm off to London.

    Lucky you. Many people are trapped here with mortgages, negative equity, property they cannot sell etc.


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  • Registered Users, Registered Users 2 Posts: 881 ✭✭✭ifconfig


    Can someone explain this to me.

    The counting of the Anglo injections of 2009 into the general government deficit would, according to Richard Bruton, increase the level of savings which the government would need to make in order to reach the below 3% target for 2014.
    John Fitzgerald (ESRI) disagrees (RTE/drivetime/Thurs) and says this is incorrect.
    Garret Fitzgerald famously pulled up the author(s) of the famous 46 economist IrishTimes letters on a point of accounting semantics by saying that they exaggerated the debt projections. His point was that it was dangerous to, in effect, "scare the horses" by including debt which was off balance sheet in terms of what the Eurostat allows to be off or on-balance sheet.

    What is the truth here ?

    Dan O'Brien of the Economist Intelligence Unit says that traders of sovereign bonds are affected by sentiment and that headline figures do matter when it comes to valuing the risk of a sovereign state.

    I would agree with John Fitzgerald that most keen observers may have already known about the level of indebtedness that Ireland was experiencing regardless of how it was accounted for by Eurostat rules.
    However, where I am sceptical is whether he is correct to say that it has no effect (assuming I am interpreting what he said on RTE correctly) on targets we need to meet for our EMU membership obligations.

    discuss ?


  • Closed Accounts Posts: 1,647 ✭✭✭MaceFace


    ifconfig wrote: »
    Can someone explain this to me.

    The counting of the Anglo injections of 2009 into the general government deficit would, according to Richard Bruton, increase the level of savings which the government would need to make in order to reach the below 3% target for 2014.
    John Fitzgerald (ESRI) disagrees (RTE/drivetime/Thurs) and says this is incorrect.
    Garret Fitzgerald famously pulled up the author(s) of the famous 46 economist IrishTimes letters on a point of accounting semantics by saying that they exaggerated the debt projections. His point was that it was dangerous to, in effect, "scare the horses" by including debt which was off balance sheet in terms of what the Eurostat allows to be off or on-balance sheet.

    What is the truth here ?

    Dan O'Brien of the Economist Intelligence Unit says that traders of sovereign bonds are affected by sentiment and that headline figures do matter when it comes to valuing the risk of a sovereign state.

    I would agree with John Fitzgerald that most keen observers may have already known about the level of indebtedness that Ireland was experiencing regardless of how it was accounted for by Eurostat rules.
    However, where I am sceptical is whether he is correct to say that it has no effect (assuming I am interpreting what he said on RTE correctly) on targets we need to meet for our EMU membership obligations.

    discuss ?

    It shouldn't have any affect as the money being put into Anglo should be once off (or a series of once offs).
    So this year our deficit could go to 30% and maybe next year 50%, but the year after it could go down to 5% or 10% as we will not put any money into Anglo in that year.


  • Closed Accounts Posts: 9,364 ✭✭✭ei.sdraob


    MaceFace wrote: »
    It shouldn't have any affect as the money being put into Anglo should be once off (or a series of once offs).
    So this year our deficit could go to 30% and maybe next year 50%, but the year after it could go down to 5% or 10% as we will not put any money into Anglo in that year.

    That's assuming if Welfare and PS Bill goes down, big IF


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