How much can we borrow?

There is no figure if the ECB continues its support programmes.

There is a big difference between now and 10 years ago. If you recall in 2010 the critical factor in meaning that we needed to go to the IMF is that it was becoming impossible for us as a country to borrow money in the usual way - via the bond markets. The yield required on Irish bonds back then was hitting 10% which would have overwhelmed us.

The big change began in 2012 when the ECB, under Mario Draghi started to purchase government bonds directly - quantitative easing. That propped up the entire market. The ECB have the power to create currency so they could essentially create it and transfer it to EuroZone countries in exchange for government bonds. Greek bonds alone dropped from over 30% in 2012 to 6% in 2014 and 1% a year ago.

There was a further development this year after Covid hit. Up until that point each government issued their own bonds but after many negotiations a new mutual Corona bond was created.

The EU met with huge demand for an issue of new coronavirus-related bonds on Tuesday, with bankers saying the sale had received the largest ever order book in global bond markets.

The deal forms the start of a borrowing binge that will make Brussels one of the region’s biggest debt issuers. Investors placed bids for more than €233bn, far exceeding the €17bn of bonds on offer, according to one of the banks arranging the deal. Buyers were drawn by the relatively high yields on the bonds, which came with 10-year and 20-year maturities, and offered more income for investors than the eurozone’s safest government debt.

The sale is the first under the EU’s €100bn SURE programme, which will provide loans to support member states’ efforts to keep workers in jobs during the pandemic. Brussels will ramp up its debt issuance next year as it funds the larger €750bn coronavirus recovery package agreed in July.

link

They should borrow €50billion more and use it exclusively for majoy infrastucture projects.

Atlantic Dawn wrote: »

They should borrow €50billion more and use it exclusively for majoy infrastucture projects.

Where would we find the builders?

The problem isn't really a lack of finance, it's a lack of skilled staff.

Any mention of a soft landing yet?

Geuze wrote: »

Where would we find the builders?

The problem isn't really a lack of finance, it's a lack of skilled staff.

Plenty of large multinational building companies would be available for large contracts.

20 billion offloaded for now to some sucker

beachhead wrote: »

Irish National Debt is 203,323,506,700 according to worldebtclocks.com

I suggest ignoring random websites like that, and using official data from the NTMA and CSO.

mcsean2163 wrote: »

I was reading a while back that the fiscally conservative more Eastern eu countries will not tolerate the current circumstances forever.

Not to mention that rewarding reckless spending and punishing nations with balanced budgets sounds crazy. Imagine if you work hard and pay your bills while your neighbour sits around doing nothing borrowing borrowing year after year. You say stuff like hard work is its own reward and someday they'll have to pay but they never pay. There's either justice or a corruption of the industrious. If justice, then we're in for a serious reckoning, if the later the EU as a whole is in big trouble.

I have 3 question for you:

1. Who has been spending recklessly?
2. Who's going to balance their budget this year?
3. What's your alternative solution?

Brussels Sprout wrote: »

Ask yourself the question - What finally ended the EuroZone crisis?

Or how about - How was it that post-crash unemployment peaked in the USA in 2010 but it didn't peak in Greece, Spain, Portugal, Ireland or Italy until 2014?

The answer to the first question is not Austerity.

The answer to the second question is that the Fed starting buying bonds in November 2008. The ECB didn't start until 2012.


Are people advocating that we go on a suicide mission of trying to balance our massive current account shortfall through austerity for fear of taking on additional debt at this time? I'd argue that that would be a deliberate act of self-harm made all the more futile by the record low cost of borrowing money.

This time it's not different. We all need to learn from the mistakes of the last recovery and not try and pull ourselves up by our bootstraps needlessly deepening and extending a recession.

Cutting spending to reflect the lower tax base is not austerity.

So called right wing or conservative politicians would recognise as Thatcher had to in the late 70s that we can't keep going on like this. Cutting your cloth to suit your purse is called common sense, not austerity.

Not getting perennial pay rises and cutting your sky sports subscription is not austerity.
Building up from the second world war with cities flattened and making the sacrifices to generate real wealth for investment, or the hunger and unemployment of the 1930s, that was austerity.

Brussels Sprout wrote: »

Ok. What would you cut to make up the (at least) €21 Billion hole in the budget this year?

Here are sample outlays to put that figure into perspective:

• Budget of the Department of Education and Skills: €11 Billion
• Total Public Pension cost €7.7 Billion (2018 figure)
• Budget of the Department of Transport: €3.5 Billion

We pay highly paid civil servants and politicians to fullfill this role. Not some random punter on a discussion forum. So I won't be going down this particular cul de sac thanks.

But there is no doubt wasted expenditure all over the place. it's interesting that the health service budget is not up for discussion. Presumably because it's considered a sacred cow, but I'd say most people if they are honest saw loads of waste in their own limited dealing with the health service, even before Covid 19. With Covid 19 many other health issues were not acted on during this year, which should have lead to lower costs.

No doubt there is fat within the education budget, and the conservative government is out spending like a drunk on this area again in recent months e.g. various springboard schemes.

Government (local or central) splurging on high rents and buying up properties in private estates is certainly another.

What also gets me about the 'austerity' brigade is that 2018 wasn't a time to make inroads to the debt problem, 2019 wasn't either, and now we are were we are. Let's be honest with ourselves here, there never is a good time to make the tough decisions, is there?

mcsean2163 wrote: »

1. The Irish government has for at least 15 years, that's why we are the third most indebted nation in the world.
2. Me.

I was asking in the context of Eurozone countries since that's what your previous post seemed to be on about.

If you want to focus only on Ireland - well here were the budget deficits for the past 25 years.



After the crash the governments, with the help of the Troika got the public finances back in order gradually over a number of years until eventually the budget was balanced again for the past few years. Seems like the opposite of reckless to me.

The Celtic Tiger era spending - yes, absolutely that was reckless. The scenario that we are in this year is more akin to where we were in 2010 though. The financial disaster has happened and now we need to ease our way out of it.

It's not possible to get out of this hole without borrowing more money. Trying to do that would do catastrophic harm to the country. It would be similar to a boxer cutting of his leg in order to make weight for a fight.

mcsean2163 wrote: »

I agree re spending now but you ignored my last points, no more level 4/5 lockdown. Get to a surplus position and 60% haircut on bondholders.

The bondholder idea is a complete non-runner. Over 40% of Irish government bonds are owned by residents of the country (mostly the Central Bank). Another third of it is owned by the ECB. There isn't some large collection of 38 year old American Hedge Fund managers who own our debt anymore. All of that debt was refinanced at lower rates which is how the ECB and Central Bank own most of it now.

As for the no more lockdown idea - well we can see the finish line of the Pandemic at this stage so it's kind of a moot point. I suspect that we will have one more lockdown period around February. If it's a choice between taking on additional debt to allow that to happen or to run the risk of overwhelming our health service and having thousands of additional deaths on our hands (in the way that USA and many European countries currently are experiencing) then I think it's a no-brainer. No country with our age profile was successfully able to stay open but isolate their older citizens from younger people, so I fail to see the relevance of your comment about under 45s not dying from the virus.

https://johnhcochrane.blogspot.com/2020/12/debt-denial.html

Does debt matter?

mcsean2163 wrote: »

Just heard Stephen Donnelly saying we're going to keep spending as long as it takes.

Gross national debt at €223 billion now.

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

What's the the figure that causes us to go bust?

Please stop thinking about national debt like you think about personal debt. This populist approach to government expenditure is why we have such awful infrastructure.

There is no such thing as too much debt as long as we can service it.

ice.cube wrote: »

Which will eventually see the dollar being removed as the world reserve currency once a suitable alternative comes along.

For 2020, yes they brought in around $3.3 trillion but spent $6.6 trillion! The Fed are unable to take their foot of the pedal.

Interesting times ahead.

Why? IMF already has multi-currency reserve. The USD has historically been one of the most stable currencies and nothing has changed there. US debt is largely short-term, so we'd need to see a massive depression in the US which didn't materially impact other countries to see a realistic reason to move away from the USD as the main currency reserve; but as I said, there are already other reserve currencies.

If we're talking hypothetical in the longer term, maybe crypto could potentially be a new reserve... that's about as realistic as a massive move away from USD in the foreseeable future.