I have never such blatant LIES come out of the DoF. The 2009 Estimates of Revenue and expenditure have been released, these figures are the Dept’s estimate of revenue and spending if no changes were made in the budget or in the level of goods and services provided by government in 2009 from 2008. There figures are horsesh1t. The highlights:
They are estimating that revenue would only fall €1.15billion next year, if they were honest they would have said €4billion+;
Deficit of close to €15billion;
Deficit of 7% of GDP on the GGB measure (for EU purposes);
The Dept estimates that it would only cost €1billion to provide the exact level of goods and services in 2009 as 2008!!;
Capital spending has already being cut by €750million for 2009.
Even to keep the deficit back to the 5.5% of GDP figure being floated by government will require €3-4billion in nominal cuts in spending next Tuesday, depending on the size of the Social Welfare package. But these figures are fantasy anyway. If he really wants to keep the deficit to 5.5% then current spending would need to be cut by circa €7billion, or about 15% in nominal terms. finance.gov.ie/documents/pub … r08eng.pdf
The doubling of the cost of servicing the National Debt caught my eye as well. It can be explained by the €11.5billion deficit this year plus €15billion next, €26.5billion in total, having to serviced on these projections. Although on these figures it would come to an extra circa €30billion over 2 years. Plus government debt is going to cost more with a €500billion sword of damocles hanging over its head.
As i’ve said before government spending is completely out of control,they are spending like the taxes of the boom years were normal and this is just a temporary blip,attempting to borrow until normal service is resumed.
What these seriously overpaid idiots don’t get,is this is normal service.
If we continue the course were on, i guarantee you will will be getting one of them 80’s “living beyond our means speeches” in about 3-4 years.
We have 2 choices,we can make the cutbacks now and be ready for the upturn (when it comes ?!)
or we can massively increase the national debt,have to take the same action in 3-4 years but then spend the next 10-15 paying all the debt off.
If you look at the sources of increase in tax revenue over the last four or five years the majority of the increase (some years 60%+ if I remember correctly) came directly from property bubble sources. We are not even looking at secondary economic effects here.
So people and speculators were taking out 100% mortgages. More than 30% of that mortgage money went directly to the government as tax. Then that tax revenue was used to finance completely out of control government spending that was growing at 15%, 20% p.a. Drops in social welfare spending masked just how out of control the increase was.
So now at least 25% of current government expenditure is unsupported by revenue in all future economic scenarios. The property bubble will never come back. Unless government expenditure is voluntarily cut by 20% to 25% in the next 12 months it will be cut by some outside agency within two to three years.
The only thing that will save FF now is a nice bout of severe inflation, or getting ejected out of the Euro, which would have pretty much the same effect.
The last thing we want is to be ejected out of the euro and face a Iceland style meltdown and whatever about inflation we certainly won’t see wage inflation so there won’t be any increases in tax.
I can tell you this though, i didn’t make prudent decisions so far and build up a nice nest egg to see it destroyed through currency devaluation if we are ejected from the euro because the government refuse to make the hard decisions.If i see this coming my money will be leaving this country.
Everybodys money is leaving in that situation , then we are back to the 1980s for sure.
The devaluation in that instance would be so total that lots of people would likely transfer their mortgage payments abroad ( take the abuse from the bank and the court cases ) and immediately repatriate the money to nearly clear their mortgages at the drastically lower exchange rate .
Not only would the smart money leave I even say that some of the dumber money would leave too.
Having seen the late '70’s / early '80s train wreck in Ireland first hand, and having seen up close those responsible for that particular economic catastrophe, I see nothing in the current situation that gives me any hope that it will not be repeated.
There is a push/pull situation with the Euro. The pull is that leaving the Euro and the following devaluation is the least disastrous scenario for the ruling party being able to hold onto power. The inevitable financial carnage would be a small price to pay to stay in power. The alternative, staying in the Euro, means huge involuntary cuts in public expenditure and a long brutal recession with no obvious end game. And FF out power for quiet a while.
The push is very simple. The Germans. I have not seen it reported much in the Irish media but Merkel is very very angry at Ireland. In every speech she has given about the current crises, including the big one to parliament this week, she singled out Ireland as been a big contributer to current mess. After the complete anarchy and humiliation over the German bank guarantee last week end the Germans will not forgive and forget. Ireland will be punished and punished quiet severely.
If any of the weaker countries are forced out of the Euro, Ireland will be asked (told) to join them. If Ireland stays inside the Euro it will suffer an IMF style intervention and its budget will be slashed. If this happens I see no scenario where the 12.5% tax rate survives. It will be raised to at least 25%, the lowest legitimate rate in other EU countries.
Want to keep you savings safe. Open a brokerage a/c and stick it in German bunds.
I’ve already hinted to family members with savings in Ireland that it might be a good idea to stick some of their money in German government bonds for that very reason.
My guess is that if Ireland left the Euro you would be looking at a 15% - 20% initial devaluation, with it settling down to around 40% below the EuroMark within a year or two. I base this on scenarios I’ve seen for Italy and Spain. I have not seen anyone do scenarios for Ireland yet put the problems are about the same order for all three countries.
Greece is toast if it is forced out of the Euro. I cannot see a Greek currency stabilizing at anything less than a 70% plus devaluation.
It is unlikely that the Euro will actively seek to kick out a member be it Greece, Ireland or Portugal. What is more likely to happen is a collapse in the Euro itself from one the big countries bugging out of its own accord. The candidates are Italy and Germany, for very different reasons. Italy really is threatening to become a developing counry again beacause of the strong Euro, its public finances were shot to pieces ever before the current crisis. It more than anyone else really needs a devaluation. At the opposite end of the scale Germany could just lose patience with the rest of us and our awful behaviour and decide to cut and run to save itself. Either event would mean the end of the Euro and the whole European project. Just look at the margin between Italian and German bonds in what is supposed to be a common monetary policy area. Those margins are straining at the bit as it is!
So for those of us who only have a rudimentary grasp of how and why this might come to pass, and what the consequences would be, how does the ordinary Joe in the street protect their Euro savings ? Is sticking it into German bonds the only way (given that they themselves might decide to quit the Euro as posited in a previous post) ?
That is about what I guesstimated ( WERE it to happen) . Are these studies available on the interwoogies anywhere ???
The near total refusal of the Irish government to cut public spending will backfire badly on it in Brussels , and that will happen much faster than anyone in our shallow media genepool seems to think.
Sure we would be forgiven for busting 3% but only if we showed signs of hitting 3% by 2011 latest . This book of estimates points to a 6%+ deficit this year and an 9% deficit next year which is taking the complete piss, frankly