Idiot's version of Irish economy

[doubleglaze]

Is this the gist of it:?

1. Annual Irish government revenue = about €60 billion. ntma.ie/business-areas/fundi … -finances/

2. Annual Irish government expenditure = about €70 billion. (ntma.ie/business-areas/fundi … -finances/)

3. Current Irish government debt = about €200 billion (??). ntma.ie/business-areas/fundi … ndicators/

4. We’re fecked.

[Eschatologist]

Revenue about 60 = 63.8
Expenditure about 70 = 70.7
So deficit is <7bn not about 10bn, which is about the same as the interest payments.

And the net national debt is 183bn not “about 200bn”.

7/183 = 3.8%. On 12 March 2015 the NTMA has auctioned 1bn of 30yr bonds at a yield of 1.307%.

If the entire net debt was refinanced at that rate the interest burden would be 2.4bn, which would be wiped out by increasing tax take in the next couple of years (before election giveaways).

It’s not good but it’s OK until the next GFC.

[yoganmahew]

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_liquidator]

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.

[AWAAF]

@the liquidator

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.

domestic demand should rise also - which should be significant.

[BoyRacer]

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.

Austria, Banks And Sovereign Default - → forbes.com/sites/francescopp … n-default/

The Hypo Alpe Adria saga ripples on. It claimed its first victim last week, the tiny mortgage lender Duesseldorfer Hypothekenbank. A number of German banks and insurance companies have admitted that they stand to lose significant amounts on Heta bonds: most recently, the German insurer Talanx said that losses on Heta holdings estimated to be “in the high tens of millions” would cost it “less than 10m EUR”, and the Landesbank Helaba confirmed exposure of 85m EUR, writedown of which would cost an estimated 25m EUR. Both of these estimates look too low to me. Creditors should in my view be expecting to lose at least 50% of their holdings.

Now HAA’s largest creditor and former owner, BayernLB, has disclosed substantial losses due to writedown of its Heta exposures. To its credit, it seems to have taken a more prudent approach than others, writing down half its holdings at a cost of 1.35bn EUR. BayernLB’s decision to increase its provisions against HAA losses was driven by the republic of Austria’s recent decision to wind up Heta and impose a debt moratorium with a view to imposing losses on Heta creditors:

And he went on to observe that sovereign debt cannot be regarded as risk-free any more. Though of course it never was risk-free, was it?

Amusingly, the architect of this “default”, Austrian Finance Minister Schelling, is critical of Greece. He says that Eurozone countries can’t trust Greece. No doubt Heta bondholders – and perhaps the German government – would say that they can’t trust Finance Minister Schelling.

there is more

[Daniel_Plainview]

A situation that pertains across much of Europe and one that gives the lie to the idea that size of borrowings doesn’t matter.

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

GOVERNMENT DEFICIT + PRIVATE SECTOR SURPLUS + TRADE SURPLUS = 0

[yoganmahew]

@Daniel Plainview

A situation that pertains across much of Europe and one that gives the lie to the idea that size of borrowings doesn’t matter.

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

GOVERNMENT DEFICIT + PRIVATE SECTOR SURPLUS + TRADE SURPLUS = 0

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.

[doubleglaze]

@Eschatologist

Revenue about 60 = 63.8
Expenditure about 70 = 70.7
So deficit is <7bn not about 10bn, which is about the same as the interest payments.

And the net national debt is 183bn not “about 200bn”.

7/183 = 3.8%. On 12 March 2015 the NTMA has auctioned 1bn of 30yr bonds at a yield of 1.307%.

If the entire net debt was refinanced at that rate the interest burden would be 2.4bn, which would be wiped out by increasing tax take in the next couple of years (before election giveaways).

It’s not good but it’s OK until the next GFC.

Many thanks, all. So (Take Two!) is this then the gist of it?:

1. Annual Irish government revenue = about €63.8 billion. ntma.ie/business-areas/fundi … -finances/

2. Annual Irish government expenditure = about €70.7 billion. (ntma.ie/business-areas/fundi … -finances/)

3. Current Irish government debt = about €183 billion (??). ntma.ie/business-areas/fundi … ndicators/

4. We’re not fecked. Unless the MNC’s feck off, in which case we may or may not be fecked, depending on your perspective.

[Mossy_Heneberry]

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

[NegativeEquity]

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound?

[NegativeEquity]

@Mantissa

Come to think of it, if Enda was actually smart he would announce all sorts of giveaways in the “spring statement” and then call a quick election before he has to submit the budget to Brussells in the fall. He’ll get the benefit of the giveaways without actually having to deliver them.

This would be the “new” politics we were promised.

[Renting_And_Proud]

@NegativeEquity

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound?

Was just gonna ask the same

Can you elaborate?

[Mossy_Heneberry]

@NegativeEquity

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound

In 2006 the government introduced new legislation under the Finance Act 2006. This means that all investment plans, that are in profit, will have to pay tax (currently 41%) on that profit.

This tax will have to be paid out every eight year and May 2015 is that year.

[NegativeEquity]

@Mossy_Heneberry

@NegativeEquity

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound

In 2006 the government introduced new legislation under the Finance Act 2006. This means that all investment plans, that are in profit, will have to pay tax (currently 41%) on that profit.

This tax will have to be paid out every eight year and May 2015 is that year.

Thanks - that actually rings a bell now. Fingers crossed no market crash before May

[Luan]

@Mossy_Heneberry

@NegativeEquity

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound

In 2006 the government introduced new legislation under the Finance Act 2006. This means that all investment plans, that are in profit, will have to pay tax (currently 41%) on that profit.

This tax will have to be paid out every eight year and May 2015 is that year.

Are life policy gains not taxed at 36%?

Also worth noting the tax would have been payable on withdrawal anyway (assuming gains are not subsequently lost).

[Mossy_Heneberry]

@Luan

@Mossy_Heneberry

@NegativeEquity

@Mossy_Heneberry

I wonder how much money the government will rake in on investment profits when the finance act 2006 kicks in on the 1st May?

Can you expound

In 2006 the government introduced new legislation under the Finance Act 2006. This means that all investment plans, that are in profit, will have to pay tax (currently 41%) on that profit.

This tax will have to be paid out every eight year and May 2015 is that year.
Are life policy gains not taxed at 36%?

It is 41% since 2014.

Also worth noting the tax would have been payable on withdrawal anyway (assuming gains are not subsequently lost).

True, but will this prepayment tax actually affect the overall value of the plan in the long term?

Anyway, Irish life have a mention of it here (three pages) :
bline.ie/uploadedFiles/bline … it_tax.pdf

[Luan]

Wow missed that little beauty in the finance act.

[Croesus]

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

[bml]

@doubleglaze

@Eschatologist

Revenue about 60 = 63.8
Expenditure about 70 = 70.7
So deficit is <7bn not about 10bn, which is about the same as the interest payments.

And the net national debt is 183bn not “about 200bn”.

7/183 = 3.8%. On 12 March 2015 the NTMA has auctioned 1bn of 30yr bonds at a yield of 1.307%.

If the entire net debt was refinanced at that rate the interest burden would be 2.4bn, which would be wiped out by increasing tax take in the next couple of years (before election giveaways).

It’s not good but it’s OK until the next GFC.

Many thanks, all. So (Take Two!) is this then the gist of it?:

1. Annual Irish government revenue = about €63.8 billion. ntma.ie/business-areas/fundi … -finances/

2. Annual Irish government expenditure = about €70.7 billion. (ntma.ie/business-areas/fundi … -finances/)

3. Current Irish government debt = about €183 billion (??). ntma.ie/business-areas/fundi … ndicators/

4. We’re not fecked. Unless the MNC’s feck off, in which case we may or may not be fecked, depending on your perspective.

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.

finance.gov.ie/sites/default … ceipts.pdf