Ireland's national debt 'one of the highest in the world' on a per capita basis

Geuze

https://www.ntma.ie/business-areas/funding-and-debt-management

During 2023, the State issued bonds worth 7bn:

We repaid other bonds and loans during the year.

Geuze

https://www.boards.ie/discussion/comment/121452707#Comment_121452707

Here is a list of outstanding bonds.

On 18-March next year, a bond will mature, and the State will repay 8bn to the bondholders.

How will the fund that? That is what the NTMA do.

They manage liquidity / borrowings, so that we laways have cash to repay debts.

Geuze

Here is some information on the public debt:

Podge_irl

https://www.boards.ie/discussion/comment/121453377#Comment_121453377

No. Having debt that you can not finance and you resort to essentially printing more money to finance is what leads to devaluation and higher inflation. This is, of course, not even an option available to Ireland. The two often go hand in hand, e.g. Argentina at the moment, but they are not necessarily causally linked.

The US, for example, has utterly ridiculously mountainous debts but because of the status of the dollar as reserve currency it is not having the same devaluing impact and in fact the US has lower inflation than much of the western world.

Nor does Ireland actually have "massive amounts of debt". Our ability to service the debt is not in question and our rates are quite low.

tom1ie

https://www.boards.ie/discussion/comment/121453587#Comment_121453587

Ok so the amount of debt doesn’t matter- it’s the ability to repay the specific amount of debt you have outstanding that matters- correct?

If so who decides this? Credit rating agencies?

brickster69

https://www.boards.ie/discussion/comment/121454018#Comment_121454018

Debt to GDP is not the only metric to see how things are in an economy.

https://en.wikipedia.org/wiki/Net_international_investment_position

https://www.investopedia.com/terms/n/net-international-investment-position-niip.asp#:~:text=A%20net%20international%20investment%20position%20(NIIP)%20measures%20the%20gap%20between,a%20specific%20point%20in%20time.

tom1ie

https://www.boards.ie/discussion/comment/121454467#Comment_121454467

Ok so using the other metrics and considering out economy is flying- even with all that debt- we seem to be in a pretty good spot, right?

Peregrinus

https://www.boards.ie/discussion/comment/121454018#Comment_121454018

The people who really decide it are the people who lend the State money. The greater the perceived risk that the State will not repay, the higher the interest rate they will demand, in return for accepting the risk of default.

Their judgements about this are of course informed by the ratings awarded by credit rating agencies.

Mr. teddywinkles

https://www.boards.ie/discussion/comment/121452228#Comment_121452228

Nearly 400000e is excessive by any countries standards. Let's get real here. Especially when has hardly any real responsibilities. What's the US presidents salary again.

tom1ie

https://www.boards.ie/discussion/comment/121455898#Comment_121455898

Yeah get ya.

Now next question, who actually lends the money to governments and buys these government bonds?

Central banks? Large Companies? Hedge funds managing pensions?

Podge_irl

https://www.boards.ie/discussion/comment/121456029#Comment_121456029

It seems excessive yes.

What remote bearing it has to the National Debt however I do not understand.

Peregrinus

https://www.boards.ie/discussion/comment/121456048#Comment_121456048

Institutional investors of all kinds (including institutions owned by other states). Also individual investors, although direct holding of Irish government bonds by individual investors is a pretty small proportion of the whole.

(You may very well hold some (indirectly) yourself, if you have any of your savings invested in a managed fund, insurance product or pension fund.)

While proportions vary from time time time, currently a bit less than half of Irish long-term government bonds are held by Irish-resident institutions and individuals, and a little more than half are held by non-residents.

The bonds are freely transferrable, so the government has no control over who holds them.

Podge_irl

https://www.boards.ie/discussion/comment/121456048#Comment_121456048

All of these. Irish bonds, for example, would be seen as low risk, steady investments.

Peregrinus

https://www.boards.ie/discussion/comment/121456029#Comment_121456029

The US President's salary is $400,000, plus an expenses allowance, an entertainment allowance and a travel allowance, that come to another $170k (non-taxable). Plus the use of three official residences. Plus a lifetime pension equal to the annual compensation of a cabinet secretary, currently about $230,000.

But this is cheap. The (non-executive) President of (much smaller than Ireland) Singapore is paid US$1.44 million. The non-executive President of Iraq gets just over US$800k. The Swiss Federal President, also non-executive — US$507,000.

And lets not ask what the non-executive head of state next door costs his country.

Francis McM

https://www.boards.ie/discussion/comment/121456224#Comment_121456224

The Prime Minister of Spain, a much larger country than Ireland, is only paid €90,000 per year.

The Prime Minister of Malta is only paid the equivalent of US dollars 56,900 per year ( less than 55,000 euro )

The Prime Minister of France is paid only 220,500 USD per year, and their President 194,300 USD.

Finlands president only gets 194,300 USD per year.

What relevance has this to Ireland? It shows how loose we are with public spending, when our 82 year old President gets over €400,000 inc his pension. That same generosity with public spending filtered from our leaders down,. The CSO reported recently average Garda income is 82,000 per year. Look at other EU countries.

In Spain, "a person working as Police Officer in Spain typically earns around 1,710 EUR per month. Salaries range from 790 EUR (lowest) to 2,720 EUR (highest). That is 20,520 per year, less than a quarter of what our Gardai earn.

https://www.salaryexplorer.com/average-salary-wage-comparison-spain-police-officer-c203j504

No wonder our national debt is so high with our public spending so out of line with European figures like that.

The economy of Spain is a highly developed social market economy. It's the world's 15th largest by nominal GDP and the sixth-largest in Europe.

Yet their police are only paid a QUARTER we pay ours.

No wonder so many 50 something year old retired Gardai own holiday villas and apartments in Spain and Portugal.

tom1ie

https://www.boards.ie/discussion/comment/121456663#Comment_121456663

How much is rent, mortgage repayments, car costs, broadband costs, food costs, clothing cost, tuition cost, childcare costs, in Spain? Cheaper than Ireland perhaps?

Podge_irl

https://www.boards.ie/discussion/comment/121456663#Comment_121456663

We can both continue to finance and pay off our debt far more easily than Spain can.

The higher salaries in Ireland make it easier to handle a higher debt per capita, not harder. Of course, debt per capita continues to be a poor measure of basically anything.

Geuze

https://www.boards.ie/discussion/comment/121456048#Comment_121456048

Savers.

Husbands marry wives.

Landlords rent to tenants.

Savers funds flow to borrowers.

Geuze

https://www.boards.ie/discussion/comment/121456048#Comment_121456048

Savers put their funds in banks, credit unions, pension funds, managed funds, etc.

These funds are then used to buy govt bonds, along with other assets.

Geuze

https://www.boards.ie/discussion/comment/121456048#Comment_121456048

It is illegal for the ECB to directly lend to States.

However, they have done various rounds of QE, where they buy govt bonds in the secondary markets.

L.Ball

The economy is strong enough for a little debt, shur we're the best economy in the EU!

Francis McM

https://www.boards.ie/discussion/comment/121458076#Comment_121458076

We said that back in 2006 too, I remember it well. Only a few years later the IMF / UK and EU had to rescue us so we could keep the lights on, and we have borrowed 200 billion since then.

https://www.boards.ie/discussion/comment/121459957#Comment_121459957

We said that back in '05 / '06 too. Rude awakening coming when the multinationals stop paying so much tax here for whatever reason, unemployment rises etc. 2 years ago we could not have foreseen 10 or 11 consecutive interest rate rises, war in Ukraine, Gaza etc, oil + electricity prices being so volatile etc. I know more than a few businesses which are just hanging on at the moment and which will probably close next year.

And a change of government, whose track record / experience / expertise some would say is of destroying things rather than building them, will not help.

Tiger20

https://www.boards.ie/discussion/comment/121451266#Comment_121451266

In reply to your points Peregrinus, and Podge, you make the points that the ‘up to €64bn’ is over 10 years and that government debt is issued over long term terms, like the €515m 2045 bond issue. Firstly, why are why isssueing a 2045 bond at a time when we have a surplus. That’s half a billion euro which is not chicken feed. Secondly, if debt is isssued over terms of approx 20 years, it stands to reason that the terms of approximately 5% of our national debt have reached maturity, so can b repaid. 5% a year paid off over a government term of 5 years is 25% of our national debt, reducing our annual interest bill by €2.5bn a year which can be then added to our spending budget. Thirdly, the purchaser of bonds is not necessarily the final holder of those bonds upon maturity, the bonds are bought and sold on international money markets. If a bond is sold, there is no reason why we cannot be the purchaser, thereby further reducing our debt. All it takes is a little imagination and a willingness to do it, so I find your comments about a bit of spare cash to be a bit demeaning.

My point is that if a government wishes to reduce national debt, there are ways to do it, and I for one, and I think a lot of rational and reasonable voters would react positively to a responsible government with a ‘ we are concerned about wasting not just YOUR money and future, but that of your children as well. Such a message and government is one I would vote for again. If, for any reason, we were to go through another financial crash or recession, starting from a point of being in debt to the tune of over €215bn in debt is not a good place to be, and paying off or reducing debt when there is a bit of ‘spare cash’ is the prudent thing to do

Francis McM

https://www.boards.ie/discussion/comment/121462355#Comment_121462355

Well said. But where are savings to be made? I suggest start at the very top, the President of the country. Why not half his pay + the current pensions he gets from the government (taxpayer) from €400,000 per year to €200,000 per year? He still has free digs and income from his large Galway investment property? What would an 82 year old be needing more that 200k a year anyway, its not as if he has a mortgage or kids to educate. Look at all the money he squandered when he was Minister for Arts.

The Arts Council's budget was €75m in 2019 and will be €134M next year. Not good value for money, I think like you it should be used to reduce national debt as well, ... as you say "for any reason, we were to go through another financial crash or recession, starting from a point of being in debt to the tune of over €215bn in debt is not a good place to be, and paying off or reducing debt when there is a bit of ‘spare cash’ is the prudent thing to do"

Peregrinus

Tiger20 — We are reducing public debt. Debt reduction doesn't require the government to stop issuing new bonds; just to issue less in new bonds each year than it redeems in maturing bonds, and we do that. Public debt peaked in nominal terms in 2021 and has been declining since. As a percentage of GNI, which is perhaps a more real measure, it has been declining since I think 2013.

And, on the technical point that government agencies can buy bonds in the market before they mature; we do that too. But the debt is considered to be still outstanding since the bonds still exist, and have to be serviced, and could (in theory) be sold again. But some non-trivial percentage of Irish public debt is held by Irish public institutions, if that gives you any comfort.

Francis — your obsession with the salary of the President creates the impression that you have no realistic ideas about how public debt might be reduced faster in any meaningful way. This is probably not the impression you are hoping to create.

realitykeeper

Back in 2008 when the housing crisis/credit crunch happened, our national debt was about 43 billion euro. It grew rapidly after 2008 reaching about 240 billion a couple of years ago. Then, when the ECB began hiking interest rates, our national debt began to fall slowly and today it is about 235 billion euro. The national debt is still falling but even slower than is was. What seems to be happening is this: When the ECB raises interest rates aggressively, the Irish national debt falls albeit slowly. Conversely, when the ECB lowers rates, our national debt increases, in fact it can increase quite quickly.

But, what is happening right now is very interesting. The ECB has hinted (but not definatively) it might not increase interest rates further. So, this uncertainty seems to be having the effect of the national debt continuing to fall but at a very very slow pace. This very slow downward trend suggests that traders/investors are uncertain but a slight majority think the next move will be up and they probably think (probably rightly) that the next move will be a while away, maybe March.

Obviously if the majority consensus was that the ECB`s next move was more likely to be a cut to interest rates, then the national debt would be slowly increasing instead of slowly decreasing. The next ECB interest rate adjustment will be very interesting whatever it does.

realitykeeper

Paradoxically, if the ECB cuts interest rates, the Euro could fall in value and that could cause inflation to rise which could necessitate more increases in the ECB interest rate. The inflation problem and weakness in the Eurozone economy makes for a precarious and uncertain 2024.

duck.duck.go

https://www.boards.ie/discussion/comment/121469211#Comment_121469211

There’s nothing paradoxical about it that’s how central banks work

rates cut, inflation eventually goes up

rates increase, inflation eventually goes down

unless your country is a complete basketcase like Russia with rising rates and inflation because of a certain erm war they started

Francis McM

https://www.boards.ie/discussion/comment/121464917#Comment_121464917

I would have plenty of suggestions on how public spending could be adjusted / could have been spent so we did not end up being one of the most indebted countries in the WORLD per head of population. However, that is another debate / for another thread, and I do not want to derail this one. I just throw out the fact that leadership starts at the top / examples come from the top, and we have our 82 year old left wing President being paid over 4 times more than the Prime Minister of Spain - and few here raise an eyebrow - says it all.

realitykeeper

I predict the US FED and the UK`s BOE will cut interest rates the next time they adjust rates. The ECB is less certain but for now it is looking like the next move (whenever it happens) will be up.

The reason I guess this is because US and UK national debts are going up. I am not sure if there is an online debt clock for the eurozone but the Irish debt clock is very slowly going down. If the direction of the Irish debt clock is anything to go by, then the next ECB move will be up.