The Government’s Financial Position

The NTMA has a new note that lays out the projected gross government debt over 2011-2015, the government’s financial assets and financial liabilities and the geographical composition of government debt holders: you can find it here.

39 replies on “The Government’s Financial Position”

so its real GDP that gets quoted in the media for a barometer of how our economy is doing?

No matter how you look at it these are scary figures, and presume we have at last drawn a bottom line on the banks. Were they meant to reassure us? Morgan Kelly’s prognosis is not too off the wall though his proposed response is.

NAMA bonds of €30.7bn and NAMA assets of €30.7bn?

(1) NAMA itself has volunteered a €1bn reduction in the value of its loans. Arguably it should be €3bn.
(2) Ratings agencies regard NAMA bonds as part of our national debt, John Corrigan may rail against them for doing so, but he will not alter the market
(3) The short term outlook for NAMA is not good with further falls expected in its main market Ireland, Commercial will drop 20% if Upward Only Rent Review leases are abolished as promised by Minister Shatter and the Central Bank indicated in its baseline macroeconomic scenario that residential might fall another 30%.
(4) Beyond the short term, who knows but a recovery at a faster pace than NAMA racks up operating costs and interest is not guaranteed.


(5) If the emergency or extraordinary liquidity measures in our banks (€150bn in the State-gteed banks) is to be converted to a medium term facility with a State guarantee and conditionality then shouldn’t that too be added to the debt, particularly if doubts remain for losses in our banks (and doubts do as evidenced by share prices, bond yields and deposit flight). David McWilliams says the collateral offered to the ECB is “rubbish” but the more general view might be that it is valuable, just not as valuable as the ECB think, in which case, the State could be on the hook for these losses also.

@Jadgip Singh

If the emergency or extraordinary liquidity measures in our banks (€150bn in the State-gteed banks) is to be converted to a medium term facility with a State guarantee ………

As a former tennis player used to often say to referees:
“You cannot be serious”.

Surely the State does not intend to give any explicit or implicit guarantee of the €150 billion.
We cannot continue to pile insanity on top of insanity and hope to survive.

If the collateral security for ECB loans is rubbish then, by definition, we are down the pan. That collateral security is Ireland’s economic capacity in the shape of government backed bonds, private sector mortgages, business loans etc. Defaulting or not is largely irrelevant in this context, as an economy we would be worthless anyway if the collateral was worthless.

Well, Ireland is not Greece! Morgan’s Kelly suggestion re the proper ownership of the banks supported here.

T[oday’s] center-right daily Frankfurter Allgemeine Zeitung writes:

“Today, exactly one year after Greece received an aid package worth €110 billion, it has become apparent that the rescue has failed and the country will not be able to get back onto its feet without restructuring its debt. As willing as the EU was to put together a new aid package, it is now ruling out a Greek default because, it is said, banks would begin to fall like dominoes. But the banks have long since transferred their problematic Greek debt holdings to the European Central Bank, which willingly took it on. The ECB has become Greece’s largest creditor. Given the sums involved, one could almost say that the entire Greek banking system belongs to the ECB. Greek banks have refinanced themselves via the central bank to the tune of €91 billion. In addition, the ECB is thought to have bought up Greek state bonds worth €47 billion. A restructuring of Greek debt would be a catastrophe for the European Central Bank.”,1518,761723,00.html#ref=nlint

@Seamus Coffey
Never seen one before. It is also remarkably clear in breaking down the assets/liabilities. Never seen that before either. It doesn’t count the 9.4 bn of bank assets in the NPRF as ‘real’ when getting net debt. Also a new one on me.

Mind you, it does show that the NPRF needs to be renamed… it’s now the National Raid Fund. While Mr. Honohan’s may be the single costliest mistake, it gets serious competition from both the guarantee and the initial legislation opening the NPRF to raiding (once opened, the magic spell of it being for future pension provision was broken). Taken together and laid at Mr. Lenihan’s door, are they bigger?


I don’t see how there was any chance of the NPRF going untouched once there was a prospect of Ireland’s borrowing costs exceeding the return on the NPRF’s assets. Nor should there have been.


yes, was just looking at that myself. I’d love to know how they justify counting the ‘investment’ in the banks by the NPRF at par too.

As to the €150bn invested in the banks, it is certain that the Irish Central Bank share of that (€67bn) is backed by collateral of a suspect nature – although 40% of that figure is accounted for by the promissory notes.

@Joseph Ryan.

The state does give a guarantee over the €150bn. The Irish Central bank share of it is guaranteed by the state (as the state is the only shareholder of the Irish Central bank). Further, the Irish banks have been issuing ‘government guaranteed’ short term debt to themselves for repo operations at the ECB. See for more on this

In looking at how sovereign indebtedness changes, I find it most interesting generally to see how much funding is projected. The present year is generally the most informative, given that you would expect that this is where the most reliable and detailed information can be found.
Like the Troika noted in in its Review Mission last month, “The government’s program (over 3years) is supported by loans from the European Union and EU member states amounting to €45bn and a €22.5bn Extended Fund Facility with the Fund. Ireland’s contribution is €17.5bn.”
As for the numbers for 2011, the “EU-IMF loan disbursement” from end-2010 to end 2011 is EUR42.9bn, with the use of Ireland’s financial buffers adding another EUR 12.5bn. See

Part of the funds above will finance the deficit this year (some €18.2bn, as the document released today reiterates); part will fund the Nov 2011 redemption I suppose (€4.5bn). And what happens to the rest? The document released today suggests €10bn net for PCAR. And the rest?

The EC document above gives a little more detail
“Debt would peak at 124% of GDP if the full €35bn available for the financial sector would be used.”
“Cash interest payments, which increase the debt level, will be higher than the accrued interest expenditure in Table 5 in 2011-2012, but lower thereafter. This is largely explained by the front-loaded interest payments of the borrowings from EFSF and an effect of accrued interest payments on the promissory notes. The latter is accounted in the government deficit after the grace period in 2011- 201221, but will be included in the gross debt only when paid in 2021-2024.”

In the Memorandum of Economic and Financial Policies, Attachment 1, that was referenced here recently, we can read (Paragraph No 30). “Given the desirability of combining the first and second reviews, we request that the timing of the timing of the of the drawings from the IMF and the EU be adjusted so as to bring forward to 15 May 2011 the adjustment to be originally scheduled to be available on the 15 June 2011…”.
Maybe this is just a technicality. But I’d like to know what is going on, as I’m sure some taxpayers would too.


The lack of any precise and detailed accounting for the funds etc. still continues to greatly surprise me. Among the questions I’d have, for example, is if funds are raised by the IMF-EU-EFSF and in the form of bilateral loans (UK, Denmark, Sweden) but not used, is there a cost of carry associated with the cash?
Releasing such information should help confidence in demonstrating that the rise in net indebtedness of the exchequer, along with contingent public liabilities, is being held in check. And yet, I don’t ready much about the exact destination of funds (other than what is above), here or in the press, although maybe I’m blind. I’ve raised the issue several times before. Please let me / us know if something is being missed.

GDP projected to be €182.7 by 2015!?!! Are these the careful projections we pay all those Department Executive the big bucks for? I’ve seen more reliable figures in Soviet production announcements.

I suppose it’s only to be expected from the people who ran us into this mess. These guys can’t even remember to write anything down, let alone what the exchequer figure are supposed to be.

Once figure did catch my eye though

An Exchequer deficit of €18.2bn in 2011, including interest payments.

Which is about the same deficit as four years ago. So after all the cuts, and austerity, and tax increases, when you added the interest payments, we’ve ending up running just to stay in place.

Ireland is like a Gombeen man on a treadmill at the Gym, sweating profusely; his German personal trainer screaming “Schnell!” as she turns up the dial. He’ll eventually collapse due to heart failure, but by God, the rest of the PIIGS on the equipment will really get the lead out when they see it. Even the old Italian patron in the corner might start putting effort into his callisthenics instead of just ogling women all day.

The last page of the document you link to seems to contain more information than you are incorporating. The total cash deficit plus promisory notes for 2011 is projected to be €23 billion (which includes December 2010). There is also a projected net redemption of short term debt €5.1 in addition to what you note above.

In case anyone has missed it, letter in today’s IT.

“Madam, – Does anybody else share my utter despair at the extreme diversity of opinion among our eminent economists as to how we should proceed from here? If they are all so brilliant, then why can they not agree on the correct solution? After Morgan Kelly’s terrifying prognosis last Saturday, we have, as usual, been bombarded by a bewildering array of divergent reaction from all the so-called experts, leaving us ordinary citizens reeling in a state of profound confusion. And I read today that an American academic (Business Today, May 10th) has thrown in her tuppence worth, by suggesting that we abandon the euro and relaunch the pound.

Just what are we to believe?”.

In comparison to the DOF figures above of (for GGD in 2011 – 2015)

173 -> 187 -> 198 -> 202 -> 204

The EU Commission figures from their February Report were higher at

178 -> 193 -> 204 -> 211 -> 214

The IMF were about 10bn higher again as they assumed all of the 35bn reserved for the banks would be needed.

The basic rule for the debt level in 2015 seems to be

– Baseline provided by DoF
– Add €10 bn if you are the EU Commission
– Add a further €10 bn if you are the IMF
– Add a further €10 bn if you are a typical celebrity economist
– Add a further €10 bn if you are a very special celebrity economist


‘An Exchequer deficit of €18.2bn in 2011, including interest payments.
Which is about the same deficit as four years ago.’

According to Finfacts, ‘Ireland’s Business and Finance Portal’.

Exchequer deficit 2008 €12.7bn
Exchequer deficit 2009 €24.6bn
Exchequer deficit 2010 €18.74bn
Est Exchequer deficit 2011 (NTMA Note) €18.2bn

Certainly worth tracking.

The plan is to close this gap (which includes interest repayments which are set to rise), through further austerity, fast (M Kelly, C O’Hagan), Medium (J McHale, C McCarthy ESRI), Slow (IMF, Government). Apologies if I’ve put people in the wrong catagory.

The question remains if the success of such an approach is possible at all. Certainly if the deficit flatlines or goes back up when the government continues to adjust, I would have thought this would indicate that the plan isn’t going to schedule at all.

On a more cloudy issue: if the more general idea is that for our own good and as part of signing up to the MoU, whether it’s working or not, Ireland simply has to get on with it anyway but that a serious alternative approach is to observe that Ireland’s could do with a stimulus package of relative New Deal proportions, a face saving way for the EU is to keep this end of things as they are, whilst going back to quietly sticking in 10bn a year in structural funds with strings on (we need a new railway system for example, so our partners can move their exports around the country).

“If they are all so brilliant, then why can they not agree on the correct solution?”

As Deep Thought has reported, the correct solution is 42. What remains to be determined is not the answer, but the question.

People write awful tripe in letters to Madam, don’t they? Since when is it the duty of economists to put aside all their philosophical differences so that this poor dimwit can be supplied with a ready-made answer?

@ All

AIB announcing a sub-debt buyback this morning fyi, offers between 10-25 cents depending on the issue, and sweeper clause included ala Anglo/IRNW to make sure there are no holdouts. Noonan also making some thinly veiled threats about “severe measures” being taken against anyone not taking part in the offer.

1. Raid on private pension funds while politicians and senior public servants pay and pensions remain at ridiculous levels versus all other comparable countries?
2. Jobs being “created” by public spending?
3. Banks insolvent, national debt increasing to insane levels,current public spending continues to increase
4. New investment advisor,Columbus AG, offers easy route to transferring funds to Switzerland.

Does one need to be an economist to understand these trends. Hope the ECB can print lots and lots of Irish Euros to keep our elite in the state to which etc.

This NTMA Note is useful, but the comments seem to confirm that even those who know whereof they speak continue to have great difficulty getting a grip on the precise state of government finances as they are now – and even greater difficulty understanding how they might develop in the future.

It is a continuing disgrace that no attempt is being made to construct a proper set of pro forma accounts (income statements, funds flow and balance sheets) as any business would have and be required to have.

Be that as it may, I get the sense that public opinion is shifting to a position that, irrespective of how the deficit and debt projections are sliced or presented, the debt burden is unsustainable – or if sustainable, that at least part of it is being imposed unfairly and unjustifiably on Irish citizens. The result is a growing popular unwillingness to bear the burden and to accept the structural reforms required to work it down. In this context, default becomes increasingly inevitable.

In response to this, my simple suggestion is that a latter should be drafted to Chancellor Merkel, a campaign organised to have it signed by as many citizens as possible and have it delivered to Berlin.

It could run along the following lines:

“Dear Chancellor Merkel,

All the evidence we see suggests you are the dominant head of government in the EU. We are writing to you to explain our predicament and to seek your assistance. We recognise that we bear some responsibility to pay for the failure of our domestic banking system, but we believe that an excessive burden is being imposed upon us. We are also being made to pay for some of the mistakes of banks and financial institutions in your country. We are not capable of shouldering this double burden; nor do we believe it should be imposed upon us.

In the interests of our common European future and to secure the future well-being and prosperity of all EU citizens we ask you to engage with your people to secure their consent to the necessary steps that you and your government should take to reduce the burden that we are bearing – and to persuade your fellow heads of government to do likewise.

Yours, etc”

I’m not sure what effect it might have, but it would give voice to the Irish people, which, unfortunately, does not seem to be being expressed sufficiently strongly bu our government.

From Sep. 08 to Feb. 11 we saw a politically dead Taoiseach walking. We are now looking at a politically dead German Chancellor walking and a politically dead French President walking. There are hoping that, by kicking the can, they can secure re-election, but the can is rapidly running out of road. They can seize the moment to rescue the Euro and the EU – and secure a sporting chance of re-election – or go down to ignominious defeat as the project sinks around them.

This is a very important release as it allows economists to nail their flags to the mast if they have the guts like Morgan Kelly and Jagdip Singh. Where will our Government debt level off?
Will it be at 204 Bill Per the SPA or 250 bill as per Morgan Kelly or somewhere in between? or will anyone punt for higher?
Its like ‘Play your cards right’ Higher! Lower!
I think the dramatic decrease in the ‘increase in Government debt’ figures are very hard to believe.
this year 24.9 next year only 14.4 then 10 .7 4.1 and finally in 2015 1.4 billion.
How can we only be increasing our debt by 1.4 billion in 2015 when people believe our interest payments will be about 10billion? we also have promissory note repayments of 3 billion per year.
Also didn’t William Buiters report indicate that the repayment schedule of the bailout was to be in 6 installments of 10 billion per year between 2015 and 2020?
Has this been changed? or was it just omitted from the 2015 figure?

I would be especially interested in the opinions of the economists who believe that default can be avoided.

@ All

One point that has been intriguing me is the apparent confidence of Rehn with regard to a reduction in the Irish interest rate which impacts on the government’s financial situation, especially his announcement of the Portuguese rates which are more or less identical to those paid by Ireland?

On checking the MOU for Portugal (see link on another thread), I see that it is based on the EFSM which in turn is based on the EU budget, a Council regulation providing the legal base, that can only be adopted on the basis of a Commission proposal by all 27 Member States and decided on the basis of QMV.

Having checked the press conference of Rehn yesterday, it emerges that this is indeed the case with the EFSM – not the EFSF – providing two-thirds of the funds and the IMF the rest.

Interesting! The meeting of ECOFIN next Monday promises to be a complicated affair.

Meanwhile, back at the ranch, while I seldom disagree with Dan O’Brien, I think he is wrong in his assessment of the government’s approach to funding its “jobs initiative” and its first real domestic maiden flight may end in a crash landing (especially as there appears to be some dispute about who is actually flying the plane). Hopefully, international flights are being handled better.

@ Eamonn Moran

Here’s a couple of points that might help from an economist who thinks that default can be avoided.

1. The capital on the Promissory Notes was included in the General Government Debt in 2010. Paying €3.1 billion a year on them does not increase our debt. The Promissory Notes fall by €3.1 billion and the borrowing to pay the Promissory Notes rises by €3.1 billion. The net debt effect is zero.

2. The interest due on the Promissory Notes is not actually being paid upfront but is being rolled up as accrued interest to be paid by extending the term of the Promissory Notes. In 2015 this will be about €1.5 billion. We while we might have an interest bill of €10 billion (with a possible reduction in the pipeline). We won’t be paying the full amount of this. The €1.5 billion interest in the Promissory Notes will be added to the GGD.

So you can say our interest bill in €10 billion and there will be no rise in our debt or our interest bill is €8.5 billion and there will be a €1.5 billion rise in our debt. We cannot use both a €10 billion interest bill and a €1.5 billion increase in the debt at the same time.

3. We have substantial cash holdings that can alleviate the need to borrow money. At the end of Q1 2011 this were almost €22.5 billion. The plan is to keep these at about €16 billion by the end of the year. Using this money to finance the deficit will reduce the necessity to borrow.

I do agree that there is a rapid decceleration of the debt accumulation and this is dependent on the delivery of about €10 billion of mostly unspecified “adjustments” over the next three years and the cessation of capital injections into the banks. Other than the three listed above there may be other minor factors that help explain the arithmetic of the slowdown but the potential for real slippage remains.

@ Paul Hunt

I’m always interested in real world action.

Reworked letter.

“Chancellor Merkel,

In November, 2010 you stated:

‘Let me put it simply – there may be a contradiction between the interests of the financial world and those of the political world.

‘We cannot explain to our voters and citizens why taxpayers must finance certain risks, and not those who made a great deal of money taking those risks.’

We, the citzens and tax-payers of Ireland, are faced with the situation of shouldering the financial burden of ruinous private Irish and European banking decisions. The Irish people are required to make whole the private losses of their own, and European financial institutions.

We recognise that the Irish state played a significant part in the failure of our domestic banking system. You will note that we have elected a new government and have in place a new Central Banker and Financial Regulator.

The country has taken four successive austerity budgets and three more are planned – this is more than any European [EZ?] member country has either attempted or achieved [chk truth of this or better phrasing], and this is at the expense of the country’s economic growth and our own social well-being.

In spite of these efforts it is becoming increasingly clear that this burden, combined with the burden of correcting the state’s systemic deficit, is unsustainable. This unsustainability is causing damage to the fabric of communities, to the state, to the standing of the euro, and to the inegrity of the European project itself.

We therefore ask you to do all you can to make good on your words for the Irish people, as well as fellow citziens of Europe.

In this, we are supporting the interests of our common European future and to secure the future well-being and prosperity of all EU citizens. We ask that you and your government take steps now to reduce this unjust burden that we are bearing – and to persuade your fellow heads of government to do likewise.

Yours, etc”

If you think we’re slewing off topic you can always email me.

If you’re serious would happily consider setting up Facebook page or similar and getting it done. You can always email me if this is not the forum for it.


Thank you for your interest in my suggestion. Not sure how best some traction might be secured. Maybe it would make sense to see if any more interest is expressed here. And, while I don’t disagree with your re-write – and your link to Chancellor Merkel’s expression of exasperation last year, I think the shorter the missive the more effective.

Why not, as Dessie O’Malley once said, ‘let the hare sit’ and see what unfolds.

@ Paul Hunt
Great idea.

@ Seamus Coffee

Thank you for the reply.

“I do agree that there is a rapid decceleration of the debt accumulation and this is dependent on the delivery of about €10 billion of mostly unspecified “adjustments” over the next three years and the cessation of capital injections into the banks”.

Lets assume no more injections to the banks.

Given that the vast majority of the adjustments up to now have delivered far less than the amount they were supposed to I do not really understand how getting to 1.4 billion by 2015 is remotely possible if we continue on the current trajectory of 10 billion of unspecified adjustments. FF were claiming to have done 20 billion of a 29 billion adjustment and yet our ‘increased level of debt per year’ continue to show few signs of significant/much contraction.

To get to 1.4 billion increase in debt by 2015 given a 10 billion interest payment would mean that we would have to take in 8.6 billion in tax more than we spend in that year. No? How is that feasible in a context of continued austerity of 10 billion adjustment?

BTW can any one confirm or deny the repayment schedule for the bailout? I know that the assumption was that we borrow from markets in 2015 to allow us make the payments but this gets less likely by the day.

@ Eamonn

i believe, at this moment in time, the current EU/IMF program envisages (ie provides only enough funding on the basis of) us borrowing in the market by Q1/Q2 2013. I’ve seen the repayment schedule for the IMF portion, but i think its been amended slightly in the last month as a result of some changes requested by FG/Labour. Haven’t seen the EU repayment schedule, but i’d assume, given the way the EFSF funds itself, that these will be somewhat more like standard bullett bond redemptions (like our existing sovereign debt) in 2015 and 2017 (on the issuance so far).

@ John McHale yes there is much more information on p87 (90 in the pdf) of the EC Programme from Feb.
Irish T bills now have been all paid off (€6bn maturing in 2011) and CP is going the same way. Set against that, “B. Debt issuance ” was planned to rise from nearly €10bn this year to 12.3bn next year and almost €27bn in 2013. The “EU-IMF loan disbursement” falls by over half in 2012 and is almost zilch in 2013, as the market is foreseen as coming back to finance the Irish financing needs. The “Exchequer cash deficit, incl. promissory notes” is seen at €18.7bn next year, €17.4bn in 2013.on the back of a further rise in the debt to GDP ratio at this time (and as the NTMA note foresees, on the back of the latest budget plans).

@ Eamonn Moran, Bond. Eoin Bond, Seamus Coffey – So this table should give you plenty to chew over, with a far earlier return to markets, and less cash to have to carry.
It is unfortunate that the information is not laid out as usual by the EC. I’d expect to see, for example, financing needs on one side and funding on the other. The table “Financing needs and sources” combines both; the NTMA note doesn’t address this detail.
There doesn’t seem to be discussion / analysis in the Irish press of figures that would appear to be key. Yet there are people reading these pages who have a very good understanding of the figures, better than any of us writing here so far. They should see the long term public interest in laying out the data clearly, for all to understand and act upon. My reading of opinion polls across Europe, Greece just as much as anywhere else, is that the public want the truth and upfront adjustment (the Latvian government was even rewarded for taking extraordinarily tough decisions).


The return to market financing, as foreseen, is feasible as long as there is a sharp cut to the budget deficit. Indeed just about all policies talked about in this forum (from avoiding higher corp tax rates to more radical ones outside of the agreed Ireland-EU-IMF Memorandum) would be made easier if Ireland manoeuvres itself into a far stronger bargaining position. Far stronger measures even than what was agreed with the Troika, as a means of freeing itself. That means cutting public expenditures and raising revenues sharply, now, even if that is also a very painful route to follow.


Ps we had John FItzgerald making the intelligent suggestion on how the IMF-EU deal would allow Ireland to finance its deficit over the next three years at lower cost than the headline interest rate would suggest. What went wrong?


Well spotted with regard to the fact that Portugal is not taking EFSF funds, leaving Ireland as the exclusive member of that particular club (where everybody has a veto on everything).

And yes there won’t be an interest rate cut next week. Last time the excuse was that it was taken off the agenda because the results of the stress tests weren’t in. This time it is the shocking news that Greece has some serious debt problems.

Hi Ciaran
I think you were trying to give us a link to a table but i don’t think it worked?

“in its biannual economic forecast, the EU said that Ireland’s debt is expected to hit 112% of gross domestic product this year before rising to 117.9% in 2012. That is up from earlier forecasts of 107% and 114.3% respectively.”
This is slightly up on dept of Finance numbers in the above post

Unfortunately greek and Porto figures are even less accurate?

The EU report addes that Greece’s debt will reach 157.7% of economic output this year and jump to 166.1% in 2012. That is up from 150.2% and 156% forecast last autumn.

Portugal’s debt will likely stand at 101.7% of GDP in 2011 and increase to 107.4% next year. That is up from 88.8% and 92.4% previously.

Read more:

I think this shows for sure that us pigs have been telling porkies with regards to our debt levels. However in my personal opinion the biggest porkies of all lie in Spanish numbers.

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