The National Debt


#321

**Government should sell bank shares sooner, not later - NTMA **
rte.ie/news/business/2018/0709/977412-ntma-annual-report/

Interesting comments. A few have been getting their statements out there, to cover themselves so nobody can say they weren’t warned in advance of any election auctioneering and the usual lobbying for spend and splurge over the coming months and years.


#322

Our debt has been static (more or less) since 2013. It wobbles around €200bn + or - 5%.

Our debt servicing cost also peaked in 2013 at nearly €8bn, is now below €6bn and will go below €5bn in 2021. Then it stops dropping and probably stabilises. Against that the ‘non bankrupt’ Ireland of 2007 paid €3bn + to service a then MINISCULE debt in comparison.

Everyone sensible will tell us to reduce that debt stock to preserve their own credibility of course. But it is not a serious problem unlike the health service or the poxy road network beyond the motorways.

People should chillax really. :slight_smile:


#323

I am not convinced @2Pack.

The cost of debt will go back up again in the next down turn. However, instead of being 40Bn in debt we’ll be 200Bn in debt (+ or - 5% as you say.)

The reason we came from a position of 40Bn was because of the great work of the NTMA.

The one consolidation now with the 200Bn is that at least the now prices are up again, right?


#324

The NTMA intelligently borrow and schedule debt, but choosing to repay debt over spending it on public services is a function of the elected government.

The reason the debt went to 40B was because the government were unsustainably but delightedly taking in 10s of billions a year in taxes generated off the private sector borrowing that was going on. It was paid down at least in part as an attempt by the government to show the doubters abroad that we were being responsible and the party could go on for ever.

Didn’t we almost have it all…


#325

Paying down debt Vs. spending on public services.
It’s not an either or proposition. You can do both.

Consider the knock on effects.
Pumped up house prices = pumped up public/health services wages. People have to live somewhere. It’s a vicious circle.

Right now, we’re threading water paying the interest. Meanwhile the principle is still hanging there until the next crash.
It’s the effect of this compound interest working in reverse that we should be thinking about.
The borrower is always servant to the lender.


#326

Problem is that for our parish pump governments intend on buying votes

Buying Votes (Getting re-elected) >>> Paying off debt (and avoiding the long term consequences)


#327

Nooooooo! The €40bn was the debt from Haughey and Fitzgeralds governments that was incurred in the 1980s and never paid off during the celtic tiger era.

However solvent AAA rated Ireland was paying interest rates of around 4-5% on that small debt in the late 2000s

The Draghi legacy means less solvent and less AAA rated Ireland was issuing 10 year paper at 0.8% interest only last week.

In other words the servicing costs have tanked and we can service €200bn for not vastly more than we spent servicing €40bn 10 years back.

I do agree with Snaps that such low rates will not last forever and putting a proper dinge in that €200bn would be a great idea. But right now our DEBT/GDP ratio is around that of Germany and coming down faster and the premium for Irish debt over bunds is a small one now. Absent a major upheaval around Brexit time, we are finally safe.

However after 2020 (which will be funded in just over a year by the NTMA BTW) we only have around €10bn coming up for refinancing in any given year and higher interest rates will apply to that not to the whole pile of €200bn .

The long term legacy after 2020 is that we will spend €4.7-5bn servicing debt and that we spent €1.7-2bn before the crisis doing that.

€3bn net worse off every year, 1% of current GDP, unless we actually pay some of the debt off now and then.

Coulda been worse, thank fuck for Mario Draghi. :slight_smile:


#328

Fact.

ntma.ie/business-areas/fundi … ical-debt/


#329

Look at the LEFT hand column for Gods sake, it was the same €40bn rolling over year to year from 1996 to 2006 incl. :smiley:

It was the infamous 1980s debt which finally stopped going up around 1994 (IIRC), we spend 15 years rolling it over thereafter. We paid nothing off during the celtic tiger era but we borrowed nothing either.

We paid well over 7% interest in 1994 on IR30bn or €36bn of debt and over 8% in 1992

oireachtas.ie/en/debates/de … B5%5D=debt

Thats €3bn a year back then and will be €5bn from 2021 onwards.


#330

I was looking at that NTMA table, as far as I could see the NPRF wasn’t included, presumably as it was FF-guaranteed to only be used for pensions. rte.ie/news/business/2007/0 … 0-pension/

The NPRF ended up just being cash and other assets for the NTMA.

E.G in 2007 the NPRF was valued at 21B, so net debt would have been (37.6B - 21B) = 16.6B.

FF were simultaneously reducing debt, adding to the NPRF, and increasing spending massively (mainly on salaries). Sadly, as things turned out, the fundamentals weren’t sound and it didn’t work out well in the end.


#331

The NPRF was mainly emptied to buy the zombie banks (rather than nationalise them with IMF debt etc) rather than fund current expenditure. You are correct on the net debt being under €20bn once the NPRF was netted off.

The new NPRF is the ISIF which has around €20bn in assets.

isif.ie/portfolio/performance/overview/


#332

I wasn’t arguing with you. Was backing you up.


#333

Though now as we’ve seen the net debt was in fact reduced to around 16.6B. I remember optimistic projections that we were a year or two away from zero net debt.

Ireland’s books were like Anglo’s, anyone looking just at the provided figures could have thought everything was rosy.


#334

Two icebergs on the horizon from the crow’s nest of the Titanic:

Obviously a movement to a true interest rate. The Fed is already on the up and up.

Massive dependance on the Paye taxpayer, with erosion of that tax base in the next decade through further offshoring, automation and robotics.


#335

Massive dependence on a subsection of the workforce by constantly removing people from the tax net and singing about it from the roof tops. Everyone should pay income related tax, even a minuscule amount, keeps them invested more in the country and its governance. Thing is when either iceberg hits the government are probably going to have to bring them back into the tax net anyways.


#336

There is no sign of that in the Eurozone yet and we will have financed the last remaining rump ( c. €30bn of it) of our 5-6% debt at the current c. 1% rates if things last as they are for another year and a half. Borrowing as much as possible in 2018 is actually a good idea.

Oddly we have no repayments coming up in 2021 and thereafter its around €10bn a year or so. No large spikes anyway.

From mid 2021 onwards we move to refinancing €10bn a year(ish) and the marginal rate could be higher on that €10bn as we borrow anew to roll it over, a lot is Euro programme debt or sovereign borrowed since 2014 at low rates This starts to add up after a few years for sure but that is an issue for around 2025 or so more than the near future.

Relatively few dollops of cash are expected that could be used to pay off a years worth of bonds, selling the banks off is one and the other is the Apple fine if we are ‘forced’ to take it off them in the ECJ. That would require a surplus is run of around 0.6% of GDP, every single year and that this €2bn surplus is protected from the clusterfuck that is the HSE.

Combined they only add up to €20bn of the €200bn debt, I do think that we need to get the overall debt down to €100bn and 30% of GDP (whichever comes first) over the long term and that can only be done by borrowing less than comes up for repayment, year upon year, for many years.


#337

Can’t say they weren’t warned anyway.


#338

Prob get the updated PC version along the lines of the response of “moaning and cribbing from the sidelines…”


#339

Irish public debt third highest in the developed world

rte.ie/news/business/2018/0 … t-deficit/


#340

205 billion according to this but god only knows which is more accurate, I’d probably have more faith in a random internet site than a government minister

nationaldebtclocks.org/debtclock/ireland