Link between current account and fiscal account

ofjames

I've read pieces from a number of commentators stating that Ireland's current account surplus facilitates the financing of our budget deficit domestically. And that this puts us at a distinct advantage to Greece and Portugal who continue to run large trade deficits.

Can someone explain to me the mechanics of how and why the current account position affects the ability to finance a fiscal deficit?

Thanks in advance

dvpower

ofjames wrote: »

I've read pieces from a number of commentators stating that Ireland's current account surplus facilitates the financing of our budget deficit domestically. And that this puts us at a distinct advantage to Greece and Portugal who continue to run large trade deficits.

Can someone explain to me the mechanics of how and why the current account position affects the ability to finance a fiscal deficit?

Thanks in advance

I presume what they mean is that a trade surplus means that we are making money from exports (that don't rely so much on the domestic economy), leading to better growth prospects, leading to a better ability to service debt.

Austerity measures damage the domestic economy, and we're less reliant on it than Portugal or Greece.

ardmacha

The current account surplus means that Ireland Inc is solvent. The government has a finance problem because it is not taking enough of the Ireland Inc's cashflow to meet its effort to fill the hole left by large private debts. This is why Daniel Sol recommended a tax on pension funds such as was recently introduced, a decent property tax would be a similar measure.

Head The Wall

ofjames wrote: »

I've read pieces from a number of commentators stating that Ireland's current account surplus facilitates the financing of our budget deficit domestically. And that this puts us at a distinct advantage to Greece and Portugal who continue to run large trade deficits.

Can someone explain to me the mechanics of how and why the current account position affects the ability to finance a fiscal deficit?

Thanks in advance

Maybe I'm seeing it wrong but "Current Account Surplus" does not compute. We still have a multi Billion deficit and we are spending more than we are taking in and bearing in mind NAMA payments are off the books

Amhran Nua

ardmacha wrote: »

The government has a finance problem because it is not taking enough of the Ireland Inc's cashflow to meet its effort to fill the hole left by large private debts.

Or because expenditure doubled over the last few years. Even without the bank debts we still have a mighty deficit.

dvpower

Head The Wall wrote: »

Maybe I'm seeing it wrong but "Current Account Surplus" does not compute. We still have a multi Billion deficit and we are spending more than we are taking in and bearing in mind NAMA payments are off the books

I don't think 'Current Account' refers to Government spending vs Income.
I think it's a measure of Imports vs Exports (and some other stuff, but mainly that).