We pay interest on the gross debt, not on the net, so I think its fair enough to use gross debt figures - it’s a little unclear from ntma.ie/business-areas/fundi … t-profile/ as to what the GGD figure is at end Feb 2014, but it’s either 205.03 or 205.02 + 4.39 billion (4.39 being the difference between gross debt and GGD (the EU measure of gross debt) at end sep 2014.
And yes, I agree it’s not good, but as long as the ECB is keeping a lid on rates it’s manageable. I think economic recovery in the rest of the eurozone (higher interest rates) is a bigger threat than a GFC… the debt load is only sustainable at current interest rates. A situation that pertains across much of Europe and one that gives the lie to the idea that size of borrowings doesn’t matter. The government is largely borrowed (or planned to be so up to surplus in 2017). Any pan-european action for investment is going to have to be ‘free’ money.
The 7bn deficit has magically come down to about 2bn this year at the run rate to the end of feb. The likes of britian are running a bigger deficit in 2015 plus Ireland will see a bounce in some areas, tourism, agri exports etc from the weaker euro.
Speaking of black swans. Across Europe there is a desperate search for tax revenue among governments, you can say there always is but they’ve already picked the low hanging fruit and it’s not enough. The next panic is a combination of capital flight and sovereign default. There is a limit to the tax revenue that can be taken, the Irish water debacle is the first warning shot in that direction. The first outward signs of the 2008 financial panic appeared in the United States in late 2005 as people started defaulting on mortgages, the first signs started in Ireland in Summer 2006 when no one showed up at the auctions. From there is took another two years until the whole thing imploded and the general public became aware and were put on the hook for the losses. The Credit-Anstalt failure happened in 1931 and that set off a chain of events that included many sovereign debt defaults. Today there is another default currently winding its way through the system. There is no appetite for any more bank bailouts, bond holders (including pension funds) are going to be eating the losses.
Size of government debt evidently doesn’t matter if the currency borrowed is floating rate fiat, printed by that country. In that case the constraint is only inflation.
Size of government debt matters critically if the country does not print a floating rate fiat currency; in that instance (Ireland), you’re just like a US Municipal State and you can go bankrupt.
Also, in discussing sectoral balances, it’s always useful to keep in mind that
It is also worth remembering that if you are just like a municipal state, this doesn’t hold true, or rather, it shouldn’t. It should only hold true at the currency level, not at the individual state level. The eurozone needs to annually ‘settle’ outstanding balances at the end of each year, just like the US does.
Deemed events occur every 8th anniversary of the policy, not on the 8th anniversary of the finance act. Deemed events occur every day of the week so it’s not going to be one bulk payment that the government receives
The revenue and expenditure figure were estimates for 2014 compiled last October. If you look they estimated revenue and expenditure for 2015 to be €65n and 70.5bn giving a deficit of 2.7% this year. But for the first two months of the year the revenue figures are ahead of what was expected. Revenue is up 16% in the first two months compared with 2014 and 6% ahead of what they expected, Also expenditure is running lower than what was predicted last October.