Can Ireland EVER pay off it's national debt ?

Somnia

I'm struggling to understand how Ireland can ever pay off it's huge national debt ?

I'm not an economist but if we now owe 90 billion (debtclock.ie) and it's going to grow to 200 billion (just for round numbers but probably not too inaccurate), and the average interest rate is (say) 5%, that means to pay back interest only, it will amount to approx 10 Billion a year - just for interest only. And we will still owe the 200 Billion. How could this even be possible ?

Other countries are in a similar situation (e.g. the US national debt is nearly 14 Trillion - usdebtclock.org is just dizzying) - I just can't figure it out how most (if not every) country in the world is in massive debt, with no real focus on paying it off.

The babies born in Ireland today are going to be really annoyed with us for this, when they're paying it off in 25 years / 50 years.

Cavehill Red

Sovereign debt, yes. After a lot of difficulty, many cuts and quite some time.

Bank debt, no chance ever. We're guaranteed to either default or else have to keep rolling the debt over so that we remain the debt slaves of the bank bondholders, the IMF and the EU forever.

This is why we must renege on the bank guarantee and renegotiate with the IMF.

ilovesleep

Cavehill Red wrote: »

Sovereign debt, yes. After a lot of difficulty, many cuts and quite some time.

Bank debt, no chance ever. We're guaranteed to either default or else have to keep rolling the debt over so that we remain the debt slaves of the bank bondholders, the IMF and the EU forever.

This is why we must renege on the bank guarantee and renegotiate with the IMF.

And with FF still in power that will never happen. There are people out there that will still vote FF. They need to completely GO. If sinn fein has any sort of a backbone they would start the revolution that we so desperately need - but we the irish people are to unbelievably afraid to start it. The anger and the rage is out there. I see it in my own home town - people turning against each other when we should be fighting our government.

Cavehill Red

Provoking internal divisions diverts the public's attention from the guilty parties.
Public v Private sector, employed v unemployed, national v non-national - all mcguffin debates promoted to divert from the realities of the situation.

Even targetting FF is inaccurate. They're simply their master's voice, the front men for the financial coup d'etat taking place in Ireland.

The bankers are the real problem, those who demand that you pay for their losses while they asset strip your country.

Those who pumped property to the sky and hold the public accountable for those debts while they renege on their own by having them nationalised.

Until people in Ireland realise that the 'bailout' is a mortgaging of their own future (to the tune of €170,000 EACH and rising) for the benefit of vulture bankers, until people decide they've had enough and refuse to pay it, as the Icelanders did, we'll be economically colonised by these people and held in debt slavery by them.

melekalikimaka

yes ww will, and we will be a better country by the end of it

P. Breathnach

ilovesleep wrote: »

And with FF still in power that will never happen. There are people out there that will still vote FF. They need to completely GO. If sinn fein has any sort of a backbone they would start the revolution that we so desperately need - but we the irish people are to unbelievably afraid to start it. The anger and the rage is out there. I see it in my own home town - people turning against each other when we should be fighting our government.

Another keyboard warrior.

It's probably better that people vent and strike attitudes here that that they do what they advocate.

Permabear

This post has been deleted.

later12

To answer this question I would say that yes, it is theoretically possible to pay back our national debt.

there are a number of ways of doing this but this is my preferred option and it involves a minor gentleman's agreement with some of our creditors.

1. Seperate national debt from piggy back debt - over the coming year, send bank debt to Brussels and put it under the control of a special purpose vehicle which seeks to restructure debentures from certain classes of creditors. This can largely be executed by the employment of a Brady Bond formula which whereby debts are progressively corrected for liability over a number of years.
2. Write down significantly and extensively the value of the assets held by NAMA thereby causing asset prices to bottom out. Investors will never have their faith restored in Irish real estate unless they are certain that we have reached the bottom - the old catch a falling knife analogy.
3. Immediate establishement of a Eurozone sovereign debt agency capable of raising capital by the issuance of eurobonds. The debt could be repayable at fluctuating rates by each member state, thereby minimising the negative impact of the common bond scheme on states like Germany, whose bund yield looks set to rise anyway. This would bring an end to the IMF bailout.
4. dramatic and significant centralisation of eurozone fiscal policy with a credible fine system for states who fail to adhere to fiscal standards and common taxation policies across the union, this would mean the abolition of our corporate tax rate or the lowering of the european rate, but that could be postponed.

This would restore economic calm to Europe and allow us to repay our debts as well as having the benefit of bringing stability to the eurozone and the sovereign funding crisis.

Mister men

The whole crisis was invented so we could never pay it back. Just rolling over the interest forever. Win win for everyone but the Irish PAYE worker.

ilovesleep

Mister men wrote: »

The whole crisis was invented so we could never pay it back. Just rolling over the interest forever. Win win for everyone but the Irish PAYE worker.

Christ! Can they not just cut the banks loose?

I have no econmic background. From reading here we are just not able for this loan. What will happen when the country defaults down the line.

jimmycrackcorm

Cavehill Red wrote: »

Provoking internal divisions diverts the public's attention from the guilty parties.
Public v Private sector, employed v unemployed, national v non-national - all mcguffin debates promoted to divert from the realities of the situation.

So the €20bn we have to borrow every year going forward to pay for public service and S/W is not a reality? Granted it will decrease each year with some savings but in a few years time it still will dwarf thebank debt.

IMO people are doing the opposite by using the bank debt to shield our fundamental problems. Even if we end up defaulting on bank debt we still cannot manage this effectively.

Cavehill Red

jimmycrackcorm wrote: »

So the €20bn we have to borrow every year going forward to pay for public service and S/W is not a reality? Granted it will decrease each year with some savings but in a few years time it still will dwarf thebank debt.

That's simply not the case. The bank debt is c. 100 billion and we STILL don't know the end of it. That current guess is predicated on NAMA breaking even, and on the banks not still hiding further liabilities, and on predicted growth and profits of the banks which are, frankly, implausible.
So conservatively, the bank debt accounts for five full years of current level deficits in one fell swoop ON TOP of the current deficit.
It's utterly unsustainable.

jimmycrackcorm wrote: »

IMO people are doing the opposite by using the bank debt to shield our fundamental problems. Even if we end up defaulting on bank debt we still cannot manage this effectively.

Then we should default on the lot now, reset and start again.
However, I disagree with you. We are capable of handling our sovereign debt, with a programme of measured austerity that does not strangle business, as the lack of lending from the zombie banks is currently doing.
Renege on the guarantee, burn the bondholders and let them go to the wall. Their very continuing coma existence has driven competition out of the Irish banking market. Their death will open the market to foreign banks which, being in good health, will be in a position to offer lending to small businesses and eager to do so.
We can sustain our sovereign debt, but the IMF deal gives us no opportunity of attempting to do so.

ilovesleep

@Cavehill red. from my understanding its the eu that doesnt want the banks to fail. the imf/eu deal wont allow it. the eu also have the imf strung by their neck. could it be possible i wonder to scrap the orignal deal, cut the banks loose, bypass the eu, and go back to the imf. surely the imf would have to say bollocks to nama, and bollocks to the banks.

Cavehill Red

ilovesleep wrote: »

@Cavehill red. from my understanding its the eu that doesnt want the banks to fail. the imf/eu deal wont allow it. the eu also have the imf strung by their neck. could it be possible i wonder to scrap the orignal deal, cut the banks loose, bypass the eu, and go back to the imf. surely the imf would have to say bollocks to nama, and bollocks to the banks.

That could be possible, although it's more difficult now with the previous deal having been negotiated jointly with the EU and IMF.
The EU does not want their banks affected by the bad debts they gave to Anglo and AIB being effectively written off, which is what would happen if the mug Irish taxpayer doesn't agree to pay them.
The IMF, theoretically, has no opinion on the matter, and ought to be open to any deal which puts the Irish economy on a stronger and more sustainable footing.
At this stage we have little to lose and much to gain by seeking to cut the banks loose and renegotiate. We might even find that such a move strengthens Merkel's hand in forcing bondholders to take their medicine, and it might therefore even be welcomed.

ilovesleep

Cavehill Red wrote: »

That could be possible, although it's more difficult now with the previous deal having been negotiated jointly with the EU and IMF.
The EU does not want their banks affected by the bad debts they gave to Anglo and AIB being effectively written off, which is what would happen if the mug Irish taxpayer doesn't agree to pay them.
The IMF, theoretically, has no opinion on the matter, and ought to be open to any deal which puts the Irish economy on a stronger and more sustainable footing.
At this stage we have little to lose and much to gain by seeking to cut the banks loose and renegotiate. We might even find that such a move strengthens Merkel's hand in forcing bondholders to take their medicine, and it might therefore even be welcomed.

So who can do that now for us. Or try to. Wont be ff thats for sure.

melekalikimaka

Mister men wrote: »

The whole crisis was invented so we could never pay it back. Just rolling over the interest forever. Win win for everyone but the Irish PAYE worker.

invented so we could never pay it back? really... this isnt ah or conspiracy theories. we can easily manage this once we hack into p.s. and welfare, which needs to be done anyway

ilovesleep

Cavehill Red wrote: »

Sovereign debt, yes. After a lot of difficulty, many cuts and quite some time.

Bank debt, no chance ever. We're guaranteed to either default or else have to keep rolling the debt over so that we remain the debt slaves of the bank bondholders, the IMF and the EU forever.

This is why we must renege on the bank guarantee and renegotiate with the IMF.

Any chance this will happen soon

kaiser sauze

melekalikimaka wrote: »

invented so we could never pay it back? really... this isnt ah or conspiracy theories. we can easily manage this once we hack into p.s. and welfare, which needs to be done anyway

Why not also hack into bank bonuses if we should hack into PS pay and welfare?

You, Sir, are the biggest hypocrite on Boards.

population

melekalikimaka wrote: »

invented so we could never pay it back? really... this isnt ah or conspiracy theories. we can easily manage this once we hack into p.s. and welfare, which needs to be done anyway

No we cannot easily manage it. We could manage it if our sovereign debt did what it said on the tin and was "Our Debt", but now that our sovereign debt is inextricably linked with STILL UNKNOWN amounts of Casino bank debt I think you will see that this will be rather more of a struggle than you suggest. I would argue that you could stop paying every public servant and every Government programme in the country tommorrow and we will still be sunk by the banks. I am genuinely worried. I am surprised how some people are not.

RichardAnd

melekalikimaka wrote: »

invented so we could never pay it back? really... this isnt ah or conspiracy theories. we can easily manage this once we hack into p.s. and welfare, which needs to be done anyway

PS pay was hacked into. Something people forget is that PS workers pay tax just like anyone else. The new tax increases will effect them too and as they pay tax into the same place they get paid from, that is essentially a pay cut. Is there room for more? Certainly but to suggest the PS workers haven't taken a hit at all is nonsense.

oppenheimer1

Will we pay it back? No, never.

Sovereign debt is rarely paid off, it is usually rolled over in perpetuity. Ultimately the size of the national debt is not a problem, its the ability of the state to service its loans (pay the interest).

Ultimately everything ends in failure given a long enough time-scale though.

Anonymous1987

The national debt would be manageable if the banks were healthy. The real issue is the bank debt which the government has guaranteed effectively adding it to national debt and increasing the likelihood of a national default.

Current government projections estimate that we will pay the following interest as a percentage of tax revenue:

Year| Interest % of Tax
2011|15
2012|17
2013|19
2014|20

The interest payments as a percentage of tax revenue projected for 2014 would take us back to interest paid in 1993/1994 pre Celtic tiger rates. The problem is other sources such as the European Commission and the IMF are less optimistic about Ireland's ability to achieve economic growth. Economic growth drives the tax revenue so we may expect the government figures above to be overly optimistic. Nevertheless, the graph below shows we have managed interest payments as a percentage of tax revenue of over 20% in the past.



The real problem is that serious doubts still persist with the banks and it is questionable whether the IMF/EU bailout is large enough to cover the banks losses. The banks may well require even further recapitalisation after the bailout funds are exhausted. This will of course increase the burden of meeting the interest repayments.

In addition, the Irish banks are struggling to gain access to short term borrowing and rely heavily on borrowing from the ECB which is normally provided by other banks. If the ECB withdraws its support and the markets are unwilling to provide short term borrowing at sustainable rates then the banks will fail and the state along with them. These are the major threats to the Irish ability to repay its debt and its hard to say how it will turn out.

ilovesleep

Can we not go back on the bank guarantee and seperate the two and take on no more bank debt. We seriously cannot continue with that bank guarantee.

Mullicker

The reality is most irish people are completely clueless and i fear FF will be re elected, which will do absolutely nothing, more severe budget cuts and a crazy bailout than cannot be paid back. We have had politicians in bed with bankers and developers, audaciously overpaid, and a taoiseach without a bank account, come on people. People will go on about social welfare scammers, immigrants and other issues which are minor compared to the pillaging of our people by the banks, and the huge corruption and incompetence of our politicians.

http://www.youtube.com/watch?v=HwSrX6NPafk

http://www.youtube.com/watch?v=nQFHgcFlrlw

Anonymous1987

ilovesleep wrote: »

Can we not go back on the bank guarantee and seperate the two and take on no more bank debt. We seriously cannot continue with that bank guarantee.

To answer that question you have to consider whether we can cope without domestic banks?

The bank guarantee covers both deposits up to €100,000 and the banks senior bondholders. The deposit guarantee is actually practised by most nations worldwide, see here. Removing this would have implications for average people with deposits in Irish banks with the likely result being a run on the banks and the collapse of the Irish banks.

Whether the government should be guaranteeing senior bondholders is questionable. Letting senior bondholders face losses would reduce the burden on the banks but it would also make it more difficult for the banks to borrow threatening their solvency and again risking an economy without a domestic banking system.

flutered

kaiser sauze wrote: »

Why not also hack into bank bonuses if we should hack into PS pay and welfare?

You, Sir, are the biggest hypocrite on Boards.

no he is not, there are quite a few mods in the running for that honour, awaiting the ban stick

Nonoperational

I'm not an economic expert but as far as I know no country pays off it's national debt. I am not aware of any country with no external debt. The way people are talking now it's like we never had national debt before this and now all of a sudden it's €90bn.

It's spiraling out of control yes but even if times were good we would never have a national debt of 0.

melekalikimaka

flutered wrote: »

no he is not, there are quite a few mods in the running for that honour, awaiting the ban stick

stating my views is not a bannable offence