Rising debt costs spark fears of an early budget

ei.sdraob

Finance Minister Brian Lenihan will be forced into holding an early budget because of the soaring cost of borrowing to Ireland in the wake of the Greek financial crisis, it was warned this weekend.

Several economists, including Colm McCarthy, UCD economist and author of last year's An Bord Snip Nua report on government spending, have said this weekend that adverse borrowing costs could require that the budget come earlier than December.

http://www.independent.ie/national-news/rising-debt-costs-spark-fears-of-an-early-budget-2173420.html

here is a more graphic illustration of our new problem



NTMA has to go begging bowl in hand issuing more debt on the 18th of this month...

and then we somehow have to loan a billion or two to the Greeks at 5%

madness

ParkRunner

Why do you always do this to us on a Sunday morning
Is the 1.3bn going to be included in the national accounts or is it off the books like the NAMA payments?

Count Dooku

EF wrote: »

Is the 1.3bn going to be included in the national accounts or is it off the books like the NAMA payments?

Do we have private company similar with SPV in NAMA, which will lend to greeks Irish taxpayers money?

Flamed Diving

It has to come before December. This Greece nonsense is making life very difficult.

ParkRunner

Count Dooku wrote: »

Do we have private company similar with SPV in NAMA, which will lend to greeks Irish taxpayers money?

So I take it the payments to Greece will be appearing on the accounts. Just wanted to clarify that for myself because I didnt know. My basic point is that it is becoming difficult to know exactly where the Irish economy is at in terms of current income and expenditure and potential future income and expenditure with all the side issues going on

ei.sdraob

EF wrote: »

Why do you always do this to us on a Sunday morning

Those pesky Greeks for whom the writing was on the wall since our last budget (if not earlier) have really rocked the boat this time

The investors actually bought our bull**** cover story of imposed austerity :0 (which makes me think they deserve to get burned if we go belly up)

It seems come Monday we are going to wake up to one hell of a "Bondzkrieg" arranged by the EU leaders who are planning to cure a debt problem with more debt

EF wrote: »

So I take it the payments to Greece will be appearing on the accounts. Just wanted to clarify that for myself because I didnt know. My basic point is that it is becoming difficult to know exactly where the Irish economy is at in terms of current income and expenditure and potential future income and expenditure with all the side issues going on

Yes i am with you there, some of the billions for the Anglo bailout this year will not appear on the budget papers due to some creative accounting, neither did they get a vote in the Dail on it

dean21

Several economists, including Colm McCarthy, UCD economist
Thease are the economists that did not see the bang coming and the one who created the on board snip report but left dublin out of the report.
There are no true economists in ireland that have a clue what they are talking about

Flamed Diving

dean21 wrote: »

Thease are the economists that did not see the bang coming

Who? Name them. I would prefer non-puppets of banks. It's kind of obvious that they would say what their bosses want them to.

Furthermore, are you aware of what "economists" do? To you, do they all sit in a room, trying to predict the next boom/bust?

Finally, Do you remember the term "doom and gloom merchants"?


Thanks.

silverharp

its obvious to anyone wit a bit of historical perspective that interest rates that gov. pay go up in this environment. Thats why losers like Lenihen ( a lawyer) should not have the power to sign off on decisions like NAMA, they havent a clue.

Flamed Diving

I thought this article, written a few months ago would be poignant to the OP topic, in a sense:

Setting a standard in fiscal reform and oversight

Fri, Mar 12, 2010

ECONOMICS: Now is a good time to consider a new approach to the conduct of fiscal policy, writes PHILIP LANE

DURING THE current economic crisis, the Government has been compelled to undertake a sizeable budget correction in the midst of a severe recession. While this route may well have been the best option given the situation we faced, it begs the question of whether a different path for fiscal policy during the pre-crisis period may have permitted a less onerous fiscal response in the last couple of budgets.

This question is also relevant for other economies that must undertake sizeable fiscal corrections, such as Greece and Britain. Debate about how fiscal policy is conducted through the economic cycle is especially important in view of Ireland’s membership of the economic and monetary union (EMU), since fiscal policy is the main tool available to deal with country-specific shocks.

Accordingly, it is timely to consider a new approach to the conduct of fiscal policy in Ireland. If a new fiscal framework could enhance macroeconomic stability for Ireland, it would improve the policy coherence of EMU membership.

Moreover, by improving the prospects for long-term fiscal sustainability, it should also improve Ireland’s reputation in international debt markets, helping to reduce the high spreads on Irish sovereign debt.

International research evidence indicates that the political distortions that may prevent the accumulation of sufficiently large surpluses during the good times can be mitigated by the introduction of effective fiscal rules and an independent fiscal policy council.

The overriding principle in designing fiscal rules for Ireland should be to preserve medium-term fiscal sustainability. To this end, it is appropriate to target an annual surplus in the structural fiscal balance – the budget balance after allowance is made for the ups and downs of the economic cycle – for several reasons.

First, Ireland faces the prospect of higher future public spending needs on healthcare and pensions due to the ageing of the population. Second, public debt will be quite substantial by the end of the current fiscal adjustment process: returning the level of public debt to below the 60 per cent ceiling specified in the EU Stability and Growth Pact will require a sustained period of structural surpluses. Third, it is appropriate to target a structural surplus during normal times to provide a buffer against a major negative macroeconomic shock, such as we are now experiencing.

In tandem with the last point, the structural balance fiscal rule should contain an escape clause by which a structural fiscal deficit is permitted in the event of a sufficiently large macroeconomic shock. Such an escape clause provides the flexibility to address major recessions or (in the other direction) episodes of overheating, which may require extra fiscal measures beyond the automatic stabilisers that are part of the passive cyclical component of the budget.

Fiscal rules are more effective if the setting of policy incorporates a role for an independent fiscal policy council. The establishment of such a council in Ireland would offer many potential benefits.

Such a council could play a role in identifying the cyclical state of the economy and the distribution of macroeconomic risk factors. Given the macroeconomic environment, it could make recommendations concerning the overall budgetary stance that would be consistent with medium-term fiscal sustainability. It could also monitor compliance with the specified fiscal rules and make recommendations concerning the appropriate adjustment path in the event of non-compliance. In related fashion, it could make an ex-post evaluation of the conduct of fiscal policy over the preceding year.

In addition to these direct budgetary roles, an independent fiscal council could contribute to the transparency of the fiscal process by acting as an independent monitor of the quality and availability of the fiscal data. It could also promote public debate about fiscal policy through engagement with Oireachtas committees and the media and the organisation of policy workshops.

In terms of scale, the Swedish Fiscal Policy Council provides a model. Moreover, it would be desirable to match the Swedish practice by including some non-Irish members in the council, since this expands the range of potential members and provides a mechanism for Ireland to learn from the experience of other countries.

It is important that the fiscal policy council is an independent institution, for the same reasons that justify the independence of central banks. But it is also vital that the council is accountable.

Accountability can be made effective by a two-track process. Council members should testify before the relevant Oireachtas committees on a regular basis and explain any errors in projections made by the council. Also, the technical quality of the work produced by the council should be audited in regular reviews by an international expert group.

It is plausible that the difficulties faced by the EU in handling the Greek crisis may lead to initiatives to encourage the formation of fiscal frameworks that combine a set of fiscal rules and a formal role for an independent fiscal council in each member state. As an early adopter of a new fiscal regime, Ireland could establish itself as a leader in European fiscal reform.

Philip R Lane is professor of international macroeconomics at Trinity College Dublin

http://www.irishtimes.com/newspaper/finance/2010/0312/1224266101517.html

© 2010 The Irish Times

This article finding its origins in the earlier work of Lane:

PR Lane (1998) "On the cyclicality of Irish fiscal policy", Economic and Social Review, Volume 29, pp. 1-16.

in 1998.

Doom and gloom.


http://ideas.repec.org/e/pla15.html