10% of tax revenues in 2011 to service the national debt

Ireland will be paying 10% of tax revenues in 2011 to service the national debt -> finfacts.ie/irishfinancenews … 0408.shtml

80% of Government Bonds are held externally? Wowsers!
The US number of 45% doesnt look so bad anymore!

See, I don’t really believe it. The story goes that the Irish banks are not financing the deficit via ECB repo. But the banks would be mad not to be doing this.

  1. The carry trade margin is huge - currently 4+% on Irish ten-years
  2. There’s no real sign that repo is going to dry up, even Herr Weber has pushed back normalisation to at least Q1 next year
  3. The interbank market requires 80+% of the collateral for a loan to be sovereign bonds
  4. The balance sheets of the big two are not shrinking. What is it they are taking on?
  5. Sovereigns count as cash for regulatory capital purposes - you might as well have the deposited at the ECB and be earning coupon on them rather than having real cash

Am I missing anything? Have I got it arseways?

I just don’t understand how it can be the case that the Irish banks aren’t hoovering up Irish government bonds at every auction.

No analysis as to whether this is comparatively important.

Indeed, historically, I’m sure we’ve been in this position before.

I’d take a punt on '86/'87 (and wouldn’t expect great odds).

No need to worry yet :wink:


Um, isn’t the Irish government on course to spend around €4 Billion this year on interest? Whereas tax receipts are around €30 Billion? How are they getting a 10% figure for 2011?

Thats 13.3% Mark, and in the link above the NMTA reckon 14.2% for 2010. What’s a few hundred bps’s amongst agencies.

That’s excluding the bank recap interest and NAMA bond interest isn’t it? Also, does “service” debt here mean merely to repay interest as oppposed to interest and principal?

Otherwise, with gross debt to GDP set to exceed 100% interest rates would need to be under 2% on average in order to have interest payments at 10% of tax receipts. To repay part of any of the loans would mean interest at even lower averages.

Yet as YM points out it appears that if 80% of our debt is external then it can’t be done on some sort of fudge by the Irish banks.

You won’t have to worry anout the interest on NAMAs billions of loans, didn’t the mighty Brian say they would be covered by the good loans.

And the ECB are good for any slack on the rest according to Forty Gaffs Fahey, sure we’re practically making money.