When will austerity end in Ireland?

Tigerandahalf

The government have said another 2/3 budgets and that around 2015 we will be close to balancing our fiscal budget or within a certain percentage of GDP. The heavy work would have been done and Ireland would be back on its feet - relief for us all and an end to austerity we are led to believe.
However, will the austerity end there?
Back in January 2012 Joe Durkan an economist with the ESRI stated we were in for years of austerity until our public debt was reduced.
http://www.thejournal.ie/ireland-faces-austerity-for-as-long-as-anyone-can-look-forward-318577-Jan2012/

So where does this leave us? Greece has had a lot of debt written off. Are we going to push for something similar? Are the government waiting for us to be in a better bargaining position?
Or are we as Enda Kenny has stated going to pay back all our debts?

How much are people prepared to put up with and where/when will it all end?

LostBoy101

Finn Gael are "yes" men so they will yes to everything the EU says and we have no choice to continue austerity as long as it takes.

Tigerandahalf

We could say FG are 'Yes' men but the people put them in government. The majority in this country are in favour of austerity policies.

hfallada

I hate the word as austerity as it just thrown about. The government needs to balance our budget. You cant expect the future generations to pay for this generations bad decision making. When the burrowing levels of 3.1% to GDP as reached the government will have more room to reduce taxes and increase spending.

Most national debt is never repaid generally. Inflation reduces the burden of it. But Ireland has less than 1% inflation, meaning the burden of debt will not diminish. A debt write off will not happen. But if more faith is restored in Irish government bonds, the interest rate will fall.

Tigerandahalf

When the burrowing levels of 3.1% to GDP as reached the government will have more room to reduce taxes and increase spending.

But will the gov have the freedom to do so if our public debt then has to be paid down. There is no guarantee that it will happen.

Rightwing

Tigerandahalf wrote: »

We could say FG are 'Yes' men but the people put them in government. The majority in this country are in favour of austerity policies.

I don't think they are.

This shouldn't be confused with the 'bertie ahern style school of economics' giving everyone pay rises that the country can't afford, then when the economy inevitably tumbles & we can't afford to pay, let's blame everyone....claim they are 'Yes' men, etc

Instead, maybe we should be looking at countries like Switzerland, where they just don't run up these crazy debts. No need for austerity, no need to be burning bondholders, no need for protests :rolleyes: etc.

Tigerandahalf

The soundbites from Europe and the gov don't sound good. We are hearing about youth schemes and internships rather than investment schemes. It is looking like Japan where graduates seem to have struggled for work for a long time.
This can't be good for house prices either if people who would be buying can't secure good secure work.

Tigerandahalf

hfallada wrote: »

But if more faith is restored in Irish government bonds, the interest rate will fall.

Can anyone tell me a bit more about these government bonds. These are all part of our long term debt. Is the maximum length of a bond 10 years?
With the yields on bonds coming down are bondholders beginning to believe that Ireland will not default on its debts or at least not in the next 10 years?
I know bonds are sold on. Have some bondholders who bought sold on bonds made a huge profit in the last few years? Didn't some investment firm make a huge profit by buying Irish gov bonds at a time when nobody went near them.

How much public debt would have to be paid down each year?

astrofool

To answer the question, the budget before the next General Election.

Rightwing

Tigerandahalf wrote: »

Can anyone tell me a bit more about these government bonds. These are all part of our long term debt. Is the maximum length of a bond 10 years?
With the yields on bonds coming down are bondholders beginning to believe that Ireland will not default on its debts or at least not in the next 10 years?
I know bonds are sold on. Have some bondholders who bought sold on bonds made a huge profit in the last few years? Didn't some investment firm make a huge profit by buying Irish gov bonds at a time when nobody went near them.

How much public debt would have to be paid down each year?

Bonds can go out as far as 30 years, I made that mistake with US govt bonds a number of years back

Scortho

Rightwing wrote: »

Bonds can go out as far as 30 years, I made that mistake with US govt bonds a number of years back

Can bonds not to out as far as investors are happy to buy?
Correct me if I'm wrong, but weren't the uk on about issuing 100 year bonds last year?

To the op yes bonds can be bought and sold once they've been issued. Franklin templeton have been very successful at buying up a large portion of irish debt at low prices compared to what the bond was worth on paper.
The reason the bond was low to buy was because seller perceived that there was a high chance of default. As that chance of default dwindles, the market is willing to pay more for that bond. (If the previous is wrong, please correct me, bonds ain't my strong point).

hfallada

Tigerandahalf wrote: »

Can anyone tell me a bit more about these government bonds. These are all part of our long term debt. Is the maximum length of a bond 10 years?
With the yields on bonds coming down are bondholders beginning to believe that Ireland will not default on its debts or at least not in the next 10 years?
I know bonds are sold on. Have some bondholders who bought sold on bonds made a huge profit in the last few years? Didn't some investment firm make a huge profit by buying Irish gov bonds at a time when nobody went near them.

How much public debt would have to be paid down each year?

The length of bonds doesnt really make a different unless the government borrowed the money a rate which is higher if they issued the bond today. NTMA( which runs NAMA), regularly buys bonds with high interest rates to replace them with lower interest bonds to reduce the burden of them.

The risk of default is one of the biggest influences on interest rates at the moment. As Ireland is slowly getting towards a balanced budget our interest rate has declined too. Bonds are bought and sold by investment firms and banks like shares. Some American firm said their investment in Irish bonds wass their best investment ever. Some firms wont buy bonds depending on their status with credit rating agency like S&P. If Irish bonds are labelled "junk" some funds are barred from buying them. Which is ridiculous considering subprime mortgages were sold with AAA rating and they turned out to be junk.

Cavehill Red

I don't think there will be an 'end' to austerity at all. I don't think an end was ever envisaged by those who brought about the austerity regime here. It might be more productive to read Naomi Klein's 'The Shock Doctrine' than ponder Irish bond yields in this regard.

ferretone

It's obvious already, what road our government is going down, to try and move towards balancing the books. As regards our inflated budget, at any rate. Previous governments have set in stone the high pay-rates for public sector and semi-private employees: that and their massive pensions. Nothing we can do about those people.

So we gouge the new people moving in to replace those as they retire. We put them on 1 year contracts at best, no job security, much lower wages, no pension promises at all. I'm not even talking about myself, I'm much older, and lost my job a while ago, I'm a lost cause :P I'm just seeing what's happening to people around me, and how the people some years ahead cut sweet deals for themselves, which are leaving the younger people coming in behind absolutely desolate. Particularly in the teaching profession. I honestly don't know how older teachers can look younger ones in the face, knowing what they have done to them

freetoall

If you really want to know when will austerity end?
Look at the figures: (please forgive me if I am a little off)
Government Debt = 130% of GDP
Financial Institution debt = 260% of GDP
Non financial institutions debt = 160% of GDP
Personal debt = 120% of GDP

Ireland is the most in debt country in the world per capita. I really don't understand why people are so excited about going into the bond market again that is just more debt. If you borrow 20 billion in bonds you are going to have to pay interest on that.

Villa05

Define austerity. Seeing as we are spending more than we are taking in, it should be called reducing stimulus program. The austerity did not begin yet.

Tigerandahalf

So do you reckon that Ire is going to repay all of its debts or are we going to continue on this road of rolling over debt until the next crisis hits us.
Durkan envisaged austerity continuing until debt was 60% of GDP. What are we talking about paying back every year for that to happen?
Where is the growth going to come from if every country is set on an austerity programme?

Rightwing

Tigerandahalf wrote: »

So do you reckon that Ire is going to repay all of its debts or are we going to continue on this road of rolling over debt until the next crisis hits us.
Durkan envisaged austerity continuing until debt was 60% of GDP. What are we talking about paying back every year for that to happen?
Where is the growth going to come from if every country is set on an austerity programme?

Depends on what you mean by austerity, the days of the giveaway budgets are over. No question about that.

murphaph

A few short years ago whenever I'd hear the word "austerity" I'd think of the war years with their rationing and people making their own clothes and things like that. Funny how a word can be so utterly redefined like that.

anto9

50 or 60 years to go .Sorry to inform but thats what we are in .Most people have seen no real austerity yet .I want the public sector to feel the pain and they will soon enough .

TommiesTank

I don't see how we can ever go back to the level of spending the government was at, or anywhere close to it.

When tax revenues increase etc the money needs to be used to pay down the national debt, not pay increments and christmas double social welfare payments. Last thing we need is giveaway budgets and more benchmarking.

At best we get to the point there there are no additional cuts, but we can't increase spending, regardless of future inflation.

skafish

anto9 wrote: »

50 or 60 years to go .Sorry to inform but thats what we are in .Most people have seen no real austerity yet .I want the public sector to feel the pain and they will soon enough .

Is this a new record? Less than2 pages in to the thread before the usual public versus private crap starts.

Tigerandahalf

One can understand why the austerity is necessary but I think the gov have failed in not securing an investment programme for the country. This would have provided some growth and projects could have been done cheaply. The ECB should have been lobbied to provide this money. The irony of the austerity is that it is making the mortgage crisis worse. Noonan has said that we can inflate our way out of debt but that isn't going to happen if we are in austerity for the next 10 years.

Rightwing

Tigerandahalf wrote: »

One can understand why the austerity is necessary but I think the gov have failed in not securing an investment programme for the country. This would have provided some growth and projects could have been done cheaply. The ECB should have been lobbied to provide this money. The irony of the austerity is that it is making the mortgage crisis worse. Noonan has said that we can inflate our way out of debt but that isn't going to happen if we are in austerity for the next 10 years.

No point doing projects for the sake of it, they have to add value to the economy. What areas of investment would like to see ?

Tigerandahalf

Doesn't our whole victorian water network need to be upgraded. What about our flood defence systems. Floods alone have had huge insurance payouts over the last number of years. How about a proper broadband network, not 2mb. All of these would add value to our economy in future years.

Rightwing

Tigerandahalf wrote: »

Doesn't our whole victorian water network need to be upgraded. What about our flood defence systems. Floods alone have had huge insurance payouts over the last number of years. How about a proper broadband network, not 2mb. All of these would add value to our economy in future years.

They would, but surely the company charging us for water should be doing the upgrades, similarly the broadband network.

Lu Tze

Tigerandahalf wrote: »

Doesn't our whole victorian water network need to be upgraded. What about our flood defence systems. Floods alone have had huge insurance payouts over the last number of years. How about a proper broadband network, not 2mb. All of these would add value to our economy in future years.

No sure about the broadband, but there is already the water services investment programme, which is driving the water conservation projects around the country and subsequent pipe replacement works. You can also look up the CFRAMs study to see all the flood mapping etc. that is underway across the country.

It is easier to cut the capital budgets for these type of programmes in each budget than do the headline grabbing cutting of PS salaries, State Pensions and welfare.

KwackerJack

When wages rise and social welfare drops!

When we stop paying crazy wages to people who clearly do not deserve or work for.

When we give our government cheap electric cars instead of fancy Luxury cars.

When we stop crazy government flight for paddy's day while a good majority of Irish people are on the breadline

Id say a mass protest to kick our leaders into submission but that won't happen!

thebman

Rightwing wrote: »

They would, but surely the company charging us for water should be doing the upgrades, similarly the broadband network.

That doesn't work as much of the broadband network isn't profit making at the moment.

With investment can come the possibility of it paying for itself in some of these areas which might cover the cost in the long term for the whole upgrade nationwide.

I know of a number of businesses that are stuck without proper broadband who have to run their businesses from rural areas due to the nature of the businesses.

Then there is the right to information for citizens. If you can provide high quality guarantees of service for information online, you can reduce the amounts of it requiring physical offices and save money that way.

So it can benefit the government to upgrade unprofitable parts of the network but not private companies.

_Kaiser_

When will austerity end in Ireland?

- When every exposed banker or businessman has been paid off

- When every politician responsible for the mess has long since retired (on their inflated and immediate pensions), or are at least are outside the timeframe for prosecution

- When the population has become so desensitised to the above muppetry that any "relief" offered by our leaders will be hailed as a breakthrough in political leadership and simultaneously close the book on the greatest fraud in Irish history

OR.. if you prefer:

Only when the EU says so (or itself collapses under its own weight or as a result of some other crisis), or we leave the EU (unlikely).
And yes, both would result in sharp severe adjustments but at least we'd be able to take steps ourselves to address it (assuming we had competent political and financial leadership - also unlikely I admit)

hmmm

Austerity will end when we take in as much in tax as we spend on ourselves. Why is this such a difficult concept to understand (and don't go on about banks, they have nothing to do with our current deficit). Even this year, our deficit will be about 5%.

We haven't had austerity, we've had a reduction in our credit card spend. We're still borrowing money just to pay our day to day expenses.

Tigerandahalf

hmmm wrote: »

We haven't had austerity, we've had a reduction in our credit card spend. We're still borrowing money just to pay our day to day expenses.

Austerity obviously isn't having much of an effect in your household.

Geuze

hmmm wrote: »

(and don't go on about banks, they have nothing to do with our current deficit).

Yes, the banking crisis does affect our 2013 fiscal deficit.

Why? Well the banking crisis cost our State 60-65bn. This is a massive increase in our public liabilities, all booked into our accounts a few years back.

So, yes, you are correct to say that all this debt has been booked into our public accounts a few years ago, and don't directly affect the 2013 accounts.

BUT, any lender to RoI is going to charge us way more interest rate, as we are way riskier, as we have accepted onto the public balance sheet 60-65bn of private bank debt.

So due to the banking crisis:

(1) our public liabilities are up 63bn

(2) our ongoing interest bill is up as a result - THIS AFFECTS THE 2013 accounts

(3) the interest rate charged to us - bond yields - is higher due to the huge banking costs - THIS AFFECTS THE 2013 BORROWING COSTS

spank_inferno

Those borrowing costs are on the way down.

Villa05

When the cosy inner circle are well looked after and the general populous does nothing about it. Does it really matter when the stimulus reduction program ends and austerity begins. Maybe the economy has been stabilised by choosing the most expensive way possible to sort out a debt crisis. Does Ireland know any other way!!!!

Think of the lawyers and other professionals including auditors, accountants, valuers and estate agents who creamed it during the Celtic Tiger and are now making a killing "working out" the crisis.

Don't just take my word for it: an inaugural survey of 100 Irish law firms revealed last year that work driven by the implosion of Ireland's banks is as a "major filler" for Ireland's top law firms.

The survey carried out by accountancy firm Smith & Williamson, supported by Amarach Research, showed that international business, bank restructuring, NAMA and litigation have helped to shelter Dublin's top commercial law firms from the full impact of the recession.

http://www.independent.ie/opinion/analysis/dearbhail-mcdonald-conflicts-rife-across-professional-realm-29573340.html

Villa05

spank_inferno wrote: »

Those borrowing costs are on the way down.

From €6,000,000,000 last year to over €8,000,000,000 this year

Ireland currently continues to borrow to pump extra money into the economy that isn`t being pulled in via economic activity. Unfortunately this borrowed stimulus is largely spent on activities that do not generate growth and many that inhibit growth.

All the money borrowed today is money that is taken out of future economic growth with interest. Unless the money you borrow today generates income/economic growth at a rate higher than the interest rate then it is dead money.

Most of the borrowing is dead money that puts a limiting ceiling on how much we can grow and prosper in the future.

Sleepy

In answer to the OP, a couple of years after it starts.

skafish

hmmm wrote: »

We're still borrowing money just to pay our day to day expenses.

We are also still borrowing to hand millions to third world dictators to inflate their Swiss bank accounts

Cookie_Monster

skafish wrote: »

We are also still borrowing to hand millions to third world dictators to inflate their Swiss bank accounts

those tanks and jets won't buy themselves you know.

JP 1800

Austerity will not end as long as people do not have any confidence in the domestic economy, more and more individuals are putting money away as there is a large uncertainty of what the next budgets will bring. We need to encourage spending by measures such as reducing the VAT rate, easing off on taxing those who are still working and creating more demand for our products and services thus creating employment. The biggest problem I can see is the cost of doing business in this country which stems from excessive taxes and charges, be it energy prices or rental costs along with the aforementioned taxes.
It also appears to me that the youth of this country are being sacrificed for the benefit of the older generation which as we know is a ticking time bomb, so much wealth and potential wealth has been transferred to the over 50s which will stifle the future growth of this country, one case in point is the disparity of the remuneration packages for teachers from the older generation to those just starting their careers as well as those in the public service.
If we as a country do not combat this issue we will have lost an entire generation to mass emigration which will have a dire social cost.

BuilderPlumber

Tigerandahalf wrote: »

We could say FG are 'Yes' men but the people put them in government. The majority in this country are in favour of austerity policies.

I don't think the majority of the people are in favour of austerity/dictatorship. Wasn't it that when in opposition, the current government parties were saying this latest form of non-violent but repressive dictatorship (that Ceaucescu would be very proud of) was wrong. The people voted for change but the government went back on their promises.

Austerity is just one big plot by governments to take more and give less. This manufactured 'recession' has been the greatest non-violent shift towards some form of polite fascism where the people are to be made as weak as possible and the government as strong as possible.

It is time for change or else the people could uprise seeking to rid Ireland of its self serving dictatorship. Instead of freedom and democracy, a Syria style civil war could erupt and we don't need this. Enda Kenny and others should enact a Velvet Revolution akin to the 1989 Czech communist party: Just admit they are wrong and pave the way for democracy.

BuilderPlumber

JP 1800 wrote: »

Austerity will not end as long as people do not have any confidence in the domestic economy, more and more individuals are putting money away as there is a large uncertainty of what the next budgets will bring. We need to encourage spending by measures such as reducing the VAT rate, easing off on taxing those who are still working and creating more demand for our products and services thus creating employment. The biggest problem I can see is the cost of doing business in this country which stems from excessive taxes and charges, be it energy prices or rental costs along with the aforementioned taxes.
It also appears to me that the youth of this country are being sacrificed for the benefit of the older generation which as we know is a ticking time bomb, so much wealth and potential wealth has been transferred to the over 50s which will stifle the future growth of this country, one case in point is the disparity of the remuneration packages for teachers from the older generation to those just starting their careers as well as those in the public service.
If we as a country do not combat this issue we will have lost an entire generation to mass emigration which will have a dire social cost.

I also think this budget and the uncertainty around it contributes a lot of negatives to the economy. Should there be a budget at all every year or should a more longterm plan be agreed? Every year, at this time, we are nervous about this budget and what it might throw at us.

Now, don't get me wrong, I have no time for this government (a crowd of chancers who went back on their promise) and that their budgets have been unfair and tough on the people. BUT you also get the sense from the media speculating that they could hit this and that and that the budgets would even be worse. When the budget comes along, people are then conditioned to think 'ah, it is not as bad as it could have been' and so on.

Why the budget has to be one big mystery is beyond me. But this mystery status is perhaps one of the main causes of lack of spending at this time.

seamus

Noonan is hinting at a modest surplus projected for the end of 2014.

So if that pans out, there's basically no need for austerity any more. Not that we'll see giveaway budgets, but there will be scope to slacken on some things. Primarily though it means that the economy will have a chance to catch up and adjust when the following budgets don't introduce anything major in the way of cuts or hikes.

Why the budget has to be one bog mystery is beyond me. But this mystery status is perhaps one of the main causes of lack of spending at this time.

Because they can't really release it piecemeal, they have to release it in one go. The issue really is that of loose lips and speculation. The media start a "what if" frenzy which gets people worried and in recent years governments have leveraged this to leak some proposals and see what the public reaction is.

If people just waited to see what was coming in the budget, there wouldn't be the same fear and uncertainty.

I understand what you're saying about budgeting years in advance, but that's not really practical. They can lay out a roadmap, like they've done - i.e. we've known for the life of this government that all budgets are going to involve adjustments of ~€5bn - but you can't make a firm budget for next year until you know what this year's finances will look like. If you make a five-year plan, you might discover that one of the measures you introduced in year one is only half as effective as planned. Then you have to readjust the whole plan and you end up doing a yearly adjustment budget anyway.

BuilderPlumber

seamus wrote: »

Noonan is hinting at a modest surplus projected for the end of 2014.

So if that pans out, there's basically no need for austerity any more. Not that we'll see giveaway budgets, but there will be scope to slacken on some things. Primarily though it means that the economy will have a chance to catch up and adjust when the following budgets don't introduce anything major in the way of cuts or hikes.

You can bet that the budget given in 2 years time for 2016 will be a very generous one! This one this year is probably the last really tough budget until budget 2017 that is!

Tough budgets are imposed in the early years of a government's term and soft budgets are given in the years before their term ends.

Geuze

seamus wrote: »

Noonan is hinting at a modest surplus projected for the end of 2014.

Note that he refers to a primary surplus, i.e. before interest payments.

Example: primary surplus = 0.5bn or 500m
Interest = 8bn
Overall deficit = 7.5bn

murphaph

This "budget hype" that you see in the UK & Ireland isn't replicated in Germany (that I've noticed anyway) for some reason. I'd like to know is it seen elsewhere. Your average German would never mention their budget IME.

micosoft

murphaph wrote: »

This "budget hype" that you see in the UK & Ireland isn't replicated in Germany (that I've noticed anyway) for some reason. I'd like to know is it seen elsewhere. Your average German would never mention their budget IME.

Probably because Germany is a Federal State where you have different budgets at different levels and times for different things. You also pay a church tax (8-9%) which covers other things. We do a big bang approach here which leads to the hype. If we had county level budgets based on property tax you might have less focus on the country budget then at present.

IMHO the real problem is that in Ireland the electorate regard the link between taxation and government spending as being very abstract . So we demand first class services and low tax (espeically for mid to low paid workers and sectoral workers) - a serious contradiction.

We need to have an honest discussion about paying for the state services we demand and not the "sure I'm paying tax so I should get everything I want at the service level I want" when the reality is that the majority of people paying tax pay nowhere near what they cost they state due to the highly progressive tax system we have i.e. where the rich pay a far far higher contribution then they cost while the bulk of taxpayers don't pay their way. I'm not arguing whether we are over progressive or regressive - I'm just stating that those who demand services need to think about where the money comes from. Currently it's from the well off (getting to the point of lower rate of return as tax evasion will start) and the pockets of our children and grandchildren through state borrowings.

ardmacha

We need to have an honest discussion about paying for the state services we demand and not the "sure I'm paying tax so I should get everything I want at the service level I want"

Absolutely. Also how many times do you hear on boards that "any revenue raised will not go to services" or the like.

Idbatterim

could they not combine this and next years budget cuts and just be done with it?! if people need a lead in time, bring in some of the cuts, tax rises etc immediately and do the other property tax hike, water charge hike, motor tax etc in June 2014 for example... On the one hand I can see the convenient argument for the government that taking out to much could damage the fragile recovery, on the other hand knowing there is another doom and gloom budget after this is doing the same thing consumer wise, its a psychological thing...

Absolutely. Also how many times do you hear on boards that "any revenue raised will not go to services" or the like.

the fact is we all know the value of what we get for what we pay is appalling, if its worse services or more tax, I know which I'm choosing. Once the absolute core services are up to scratch that is...

Tigerandahalf

Geuze wrote: »

Note that he refers to a primary surplus, i.e. before interest payments.

Example: primary surplus = 0.5bn or 500m
Interest = 8bn
Overall deficit = 7.5bn

How much interest are we paying every year? From what I googled we are paying at least 5 billion. It is crazy that we are paying interest like this. You have to wonder if we would have been better off taking a different course. That is penal interest to be paying. 5 years or more of that and we will have paid out a massive amount. We truly are docile as a people.