The National Debt


The Apple Money could be the worst 13 Billion windfall ever. No American company will ever again trust our tax offer.

GGD is now 214.3 Bn. Euro. AIB’s current market cap is less than 11 Billion so the State’s remaining 70% might be worth 9 Billion on a very good day (we may have missed that boat). NAMA is expected to return 3.5 Billion after 2021. AIB and NAMA combined would get GGD down close to, but not below, 200 Billion Euro.

When the sun is shining, it seems we are untouchable, and credit to the NTMA for organising our debt profile to minimise our exposure. They managed to raise 4 Billion at 1.53% with their 2050 bond today. That’ll pay for rural broadband. :smirk:

So why worry? If we were some wonderous exception, I’d be grateful and keep my fingers crossed, but we are part of a bigger pattern that is too weird to last. Greece is borrowing at lower rates than the US Treasury! ! ! I defy anyone to say that is sustainable. was


The debt is to drop to around €200bn in 2020 and realistically the 3 windfalls I listed, if they came in, would be about 2021 and could result in a debt reduction to €180bn by 2022.

I am not comfortable with a debt over 40% of GDP or €150bn, (€150bn NET) whichever is smallest.

We have a long way to go to get anywhere near that and all we have done since around 2013 is stabilise the Gross debt at around €200bn


With this sort of interest they should be looking at a 20 year syndication next month as it would appear they can get it off with a coupon around 0.95%. Maybe not quite €4bn but there should be enough interest for €2bn of issuance and a nicely positioned new benchmark rate.

The Morkesh indicate that they would accept a 1.4% yield on a 30 year now.

They should be looking at issuing another ~€8bn between now and October in case there is a spike post Brexit. 2020 will be a very quiet year and almost no bonds need issue that year at all given we have a sort of holiday in 2021.


Just a quick one, is the drop to €200bn in 2020 due to NTMA debt restructuring/bond resissuance or some other factor?


It is because the NTMA have a payment holday in 2021 and will not be raising funds (as usual) for the following years redemptions while at the same time they are paying off near €20bn in old debt in 2020

Running down the cash pile on hand is what it is. They start rebuilding the cash pile in 2021 to deal with 2022 redemptions.

End 2020 will (uniquely) look very good, the debt GDP ratio then is forecast at 56% of GDP, near €20bn paid off in 2020 and minimal cash at hand as no debt is to be redeemed in 2021 compared to recent years. If any of the listed windfalls come in in late 2020 it will be less than €200bn, EG a NAMA windup and disbursal. The debt GDP ratio could even hit 55% then.

Both the ratio and debt will rise in 2021 absent a windfall as we must prefund 2022 redemption of 3% of GDP and the economy may not grow much that year for example. But we roll the same redemption rate in following years, around 3% of GDP each so it is a one off increase.


Our EFSF debts. These amount to €20bn or 10% of the national debt. We have ESM debts too.

(in € '000) 31.12.2017 31.12.2016
Loans under EFSF 1

  • to Ireland 4,251,265 4,225,119
  • to Portugal 7,175,315 7,167,124
    Loans under EFSF 2.1
  • to Ireland 14,351,622 14,334,069
  • to Portugal 20,344,175 20,329,844
  • to Greece 137,436,481 136,083,145
    Loans to euro area Member States 183,558,858 182,139,301

As we can see 70% of the EFSF debts of around €200bn are unlikely to be repaid and are not going to be refinanced by other means by the sovereign involved. The EFSF was meant to be ‘temporary’ unlike the ESM which is permanent.

Ireland could refinance EFSF as sovereign debt from 2021 onwards when some are to be rolled over (at least we seem to intend a rollover) . We pay 1.7% interest on these ( at least, it could be more) and we could replace them with a mixture of 10 and 20 year bonds where we save a few quid interest going forward. If you refinance €2bn a year at our current 10 to 20 year rates between 0.6% to 1.0% you might save 0.7% or 70bp in interest per €2bn refi per annum or €14m per annum, small beer in the overall scheme of things but still beer. A note on EFSF and ESM rates here. > ESM Loans are cheaper and likely will never be refinanced before eventual expiry.

However the interesting bit is our hard investment in the EFSF. Against the €184bn of EFSF loans the Eurozone members paid in €28bn capital and we paid in €0.5bn of that.

Were Ireland and Portugal tro refinance their EFSF loans as sovereign it could result in a 30% reduction in the size of the EFSF and a refund of 30% of our investment, c €150m, as well as the annual savings on interest payments above. In theory, anyway, we get €5m back for every 1% reduction (or €2bn) in the size of the overall EFSF itself whether we or the Portugese do it.

We ‘invested’ another €2bn in the ESM (again that is IIRC) but as that is a permanent mechanism we are unlikely to see much or indeed any of that ever coming back to us as a return to shareholder. Not in my lifetime anyway. :slight_smile:

Combined, we can see that 1-2% of our total national debt was incurred merely so that we could ‘invest’ in these 2 bailout mechanisms as a shareholder. It would be nice to begin the wind down process on the EFSF, preferably next year if low rates hold. Our overall debt will still be below 60% of GDP even if we borrowed €10bn specifically to refinance EFSF bonds due to rollover.


Just a note.

Debt/GDP projections around budget 2017 were that the debt/ratio would drop below 60% by end 2020 and we would exit Eurozone enforcement thereafter.

Recent (as in last the 6 months) projections have been much nicer, the ratio is projected to fall to 56% by end 2020 right now. However I consider this scenario to be most unlikely and I would be happy with 59.9% at the end of 2020 myself given the state of the UK economy and the freefall in iPhone sales right now.

For now we can but smile at this debt/gdp projection from the NTMA and all hope it actually gets under 60% at the end of 2020 and then stays down there given all the headwinds out there and the verifiable lack of a big windfall landing in the exchequer in cash.

Key Economic Figures.

2018 2019F 2020F 2021F 2022F 2023F

64.8 % 61.1 55.8% 55.4 53.2 51.6

LUCKILY Eurozone QE kicks back in soon as repurchases and the ECB will be buying more of our bonds in 2021 and 2022 because our capital key or ‘weight’ in the Eurozone has recently increased so they must adjust their holdings of Irish Paper upwards some.


This is good news, but it won’t get anyone elected. Spending money gets people elected


2Pack is right to question the NTMA projection and to say the goal should be to get under 60% by 2020 and stay there.

The improvement is all about GDP, the denominator, not the numerator - our government’s debt which will not shrink because there is no political will although it leaves us very exposed to risks,from Brexit and Trump to unpredictable events (Straits of Hormuz?).

When the next crisis hits, the markets will say our GDP growth is irrelevant because we don’t have the power to increase taxes in line with GDP growth. Look how fast the government has run away from the opportunity to collect more property tax. Did any candidate in the local elections say they would not cut the LPT?


For many, it’s very difficult to take the Irish GDP figures seriously post Leprechaun Economics

But Income taxes are growing YoY which is making some inroads to getting the house in order.


Income tax receipts are not growing as fast as expected, and not as fast as expenditure. The downside of our GDP figures in that we are paying much more to the EU.


There are too many potential headwinds to be satisfied with a debt nudging under 60% of GDP in 2020.

  1. Trump and his trade wars.
  2. OECD mandated changes to corporation taxes in future.

That is why I said our target needs to be 40% of GDP or €150bn, whichever is LOWER.

The second part of that equation is the hard one to solve, we could get some windfalls but never €50bn worth of them that replace our borrowing over 4 typical years in the 2020s.


There’s a good wiki page about Modified GNI.


How does this affect the calculations?


Marginally, this would likely be intellectual property which will merely distort GDP upwards and have almost no effect on GNI* (thanks for that recent link Snaps) bar the 5% royalty tax they pay on it perhaps. It does not diminish the still pressinf need to continue to reduce Debt as a % of GDP along with our absolute debt.

So far what we have done is:

  1. Stabilise debt at €200bn for c.5 years already. It has been pretty much static for many years.
  2. Reduce annual debt servicing cost by around €2.5bn since peak interest bill in 2013/4 of around €7.8bn
  3. Reduce our 2013 era peak Debt/GDP ratio by around half in 5 years, helped hugely by a limited number of sweeping revaluations and transfers such as the Microsoft one. The Microsoft move will thankfully offset a lot of risk we faced from Apples travails in Asia this year.

Will our debt/gdp ratio go below 60% in 2019 rather than 2020, that is actually possible now but a hard act to follow in 2020 post Brexit and with Apple possibly faced with writeoffs on the value of their IP as early as next year.

This all means we must still reduce our overall debt levels in hard cash, not just the ratio which is relative.


Not much in the overall context, but some.

The National Asset Management Agency (Nama) expects to hand over its likely €4 billion surplus to the State in 2020 and 2021.

The agency, set up a decade ago to take over Irish banks’ property loans following the crash, predicted on Thursday that it would earn a €4 billion surplus for the State after clearing its remaining liabilities.

Outgoing chairman, Frank Daly, confirmed that Nama would transfer the first €2 billion of this to the Exchequer in 2020 and the remaining €2 billion the following year

Our scheduled debt refis in those two years, currently, are around €15bn or so (very very little in 2021 itself) so perhaps we might start on swapping out that, by then, relatively expensive EFSF debt in 2020.

NTMA also say that our interest rate bill on the accumulated debt might nudge in under €5bn in 2019 for the first time in many years.


Interesting little conundrum Monday, the auction schedule for next week is to be announced.

Choices are,

  1. a 3-4Bn issuance of 10 year at a rate as low as 0.4% coupon, pretty unprecedented but that is where levels are at this week after a collapse in Bund yields with all the bad news from German Manufacturing.

  2. A mixed issuance of some 10 year paper at 0.4% and perhaps up to €1bn 20 year at a rate of around 0.8%, again utterly unprecedented.


  1. Another syndication, that would be at least €2bn of 20 year paper to get a good benchmark set in that particular space at perhaps even as low as 0.75% the way things are at present.

Anyway, we will know monday, right now all 10 year German paper (or shorter) is gone negative yield. :kissing_smiling_eyes:

In between there is an interesting potted history of the recently ended Draghi QE to be read here. :slight_smile:


Many thanks for the link, 2Pack. No wonder the Central Bank paper got so little media attention - it’s only the most authoritative view of the most fundamental economic policy in the history of the State :face_with_symbols_over_mouth:

Investors are now paying the German government to take their money because the foundation of the German economy is under threat. That’s the world we live in.

Somehow, this logic did not apply to Ireland when our construction industry collapsed. :bangbang:

Today, even the Greeks are able to borrow more cheaply that the US government. Despite the ECB not buying Greek bonds. Explain that:


I totally agree that the pricing of Italian and Greek debt disregards the fundamental risks involved in purchasing their paper vis a vis US Treasury Bonds. Even Spanish 10 year is now likely to attract an interest rate of only around 0.6-0.7% and their deficits are only barely under control and could head downhill fast.


Some odd behaviour by the NTMA has been flagged up in their recent forward funding plans.

What exactly is this ‘other’ €5bn and this €2bn Exchequer Borrowing Requirement (the government is supposed to balance the 2019 budget and borrow nothing, at least officially) . A rather odd €7bn to be funded this year IMO.

We have 2 bonds falling due this year, €7bn of 4.4% in June and €6bn of 5.9% in October. These account for the €13bn figure.

The National Debt was €214bn in April + €4bn borrowed in May + €4bn??? ish borrowed in June minus €7bn redeemed in June should leave it at €215bn end June with a redemption due in October to bring it to less than €210bn again as we should borrow relatively little this year from July Onward I would think, Brexit and all that. :frowning:

As well as that the NTMA had €21bn cash at end April which when May+June issues minus June Redemption are calculated will not change much at end June. It should increase to €22bn in fact.

The year end cash at hand projection indicates that something else is to be paid off early, it cannot simply be UK Bilateral as that will only be around €2bn at end 2019 if payments are strictly on schedule there, although we might yet clear the UK Bilateral, by agreement, in 2019.