After the announcement that the €4 billion used to recapitalise Anglo Irish Bank last year has to be included in the General Government Deficit, I was surprised to see speculation on this blog and elsewhere that the €8.3 billion in promissory notes issued this year might not count towards the deficit. Yesterday in the Dail, Brian Lenihan made it clear that this full amount was being added to the general government debt:
The recapitalisation of €8.3 billion by issuing a promissory note has been recorded as increasing Ireland’s general Government debt by that full amount in 2010 and, pending the agreement of the restructuring plan, it is appropriate not to include it in the deficit measurement until the matter can be reviewed on foot of any decision made by the European Commission on the plan.
So, the full amount has been added to the stock of debt but we are awaiting a decision on whether it adds to the deficit.
Personally, I like my stock-flow identities to add up, so I can’t see any reason why the full amount wouldn’t be added to the deficit. Perhaps others who understand the statistical issues better than me could explain how these additions to the debt—which are clearly “non-financial transactions” as defined by Eurostat—will not be counted as part of the general government deficit.