Leaving the IMF/EU Bailout? What does it mean?

freedomtoday

Hi all,

I'm a Leaving Cert Economics Student. I've been hearing a lot these days about Ireland exiting the EU/IMF Bailout Deal. I simply don't understand what this means. Surely we're shackled in enough debt to keep us busy till I'm in my 60's? Rather than spend hours researching this, I thought I'd throw it out here. Any concise explanations?

Farmer Pudsey

What this will mean is that the trioka will not be able to infuence our budgetry policy or the government will not be able to use the excuse that some policy they implement is because of the trioka. An example of this is Property tax which the Trioka is supposed to have insisted that we implemented they also re supposed to be unhappy with levels of PS pay. The government when they implement policy that contains cuts blame the fact that these are because of the trioka the best example is the Property tax.

freedomtoday

But surely we are still under stringent fiscal conditions to pay back the billions we are borrowing?

maninasia

Of course there would have to be cuts anyway, the IMF/ECB just provide a convenient target to place the blame on when the masses kick up.

Scofflaw

freedomtoday wrote: »

But surely we are still under stringent fiscal conditions to pay back the billions we are borrowing?

There's a difference between "market discipline" and the troika programme. The latter is a an agreed programme of targeted reforms, including cuts and tax increase targets - the former involves, first an foremost, looking solvent and sustainable.

As to paying back what we're borrowing - we're not likely to, we're likely to ensure that we can meet the interest payments, and roll the principal over as it falls due. That's what provides the lever for 'market discipline' - we'll need to borrow afresh to replace old loans as we go along, and the rates at which we can borrow will depend on how the markets view us as doing.

In that sense, we've had a few years holiday from the ratings agencies, but once we exit the bailout, they'll become important again, because whatever one may think of them, their ratings determine to a large extent which market funds can buy Irish sovereign debt - and the level of competition for Irish sovereign debt in turn determines the rate at which we can borrow.

Finally, while the debt is likely to still be in place when you're in your sixties, you're very unlikely to notice it, any more than last decade we noticed the unpaid debt from the 1980s, which in 1990 was swallowing a quarter of the State budget annually in interest payments, standing at about 96% of GDP.

cordially,
Scofflaw

carpejugulum

Scofflaw wrote: »

Finally, while the debt is likely to still be in place when you're in your sixties, you're very unlikely to notice it

He will be very unlikely to care about it because his main concern will be government's inability to pay public pensions.