Eurostat debt figures released, Irish debt/GDP at 108.2%

Details here. The deficit is now below 10%, which should if I’m right be the talking point on official press releases and the news tonight and such. The target in the budget (here, page 18) was 10.1%. The Budget target for debt in 2011 was and from the footnotes (remember Tom Waits’ quote about the small print):

Ireland: Eurostat is expressing a specific reservation on the data reported by Ireland, due to the fact that the restructuring plans of Allied Irish Banks and Irish Life & Permanent are not yet finalised. These restructuring plans have been used by the Irish statistical authorities to calculate in the reported figures a (deficit increasing) capital transfer element of 3.7% GDP arising from the July 2011 government injections into the two banks. Eurostat awaits the finalisation of the restructuring plans, including approval by the EU competition authorities, so that the amount of the capital transfer element can be confirmed.

Eurostat is also expressing a specific reservation on the data reported by Ireland, due to the statistical classification of National Asset Management Agency Investment Limited (NAMA-IL), which is currently classified outside the general government. Owing to the nationalisation of one of its previously private beneficial owners, whose interest is currently under a process of sale, NAMA-IL has been in majority public ownership since July 2011. Eurostat’s decision of 15 July 2009 on public interventions during the financial crisis specifies that majority private ownership is necessary for such an entity to be classified outside the General Government sector.

Another reservation might be with respect to nominal GNP, where the debt ratio now stands at roughly 131% (169/129).

Author: Stephen Kinsella

Senior Lecturer in Economics at the University of Limerick.

31 thoughts on “Eurostat debt figures released, Irish debt/GDP at 108.2%”

  1. @EU, ECB

    Unsustainable.

    @Ajai Chopra

    When will they ever learn
    When will they ehheeeevv_er_learn?

  2. @Longtail

    Pity they didn’t firesale the whole lot a few years ago, fire the developers as well. Basic principle of meltdown/default in Sweden or anywhere else, ‘get rid of the toxic stuff’ asap, we decided to hold onto it to really roast ourselves and keep the party going for developers and financial services ? Fire those who drove that idea through for a start. Bet that 17% is not Irish green field commercial land. What’s happening with the ghost estates of Tir na N’Og. They’ll keep the bad stuff for last having sucked what they can out of the NAMA beast. But the plan has backfired now property prices have gone through the floor even without NAMA flooding the market. The whole mess was set up on the expectation of 3% growth that would allow them to sell back into revived economy at a profit. Fail again! Close NAMA and give the toxic stuff back to the banks to give them something to do and save a bit of money.

  3. We have a debt-based monetary system in which our commercial banks create both money and debt through lending.

    They also delete both money and debt through loan repayments.

    Since the cash money supply has become insignificant, runaway national debts have been required to keep us trading reasonably well.

    However we’re finally at the end of the road for this system and we have to start discussing other ways in which we could introduce digital money to the economy.

    Paul Ferguson
    Sensible Money

  4. Net debt/GDP is around 95% i think. Its actually a far more accurate measure, and though Eurostat doesn’t seem to like it, the IMF have referred to it in some of their recent publications. On that score, Ireland and Italy both see a pretty significant benefit, while the likes of UK, France and Portugal get little or none.

  5. http://www.tradingeconomics.com/ireland/government-debt-to-gdp

    Leaping by 30% 2010-11

    Refer 10:32 above:

    (1) Does Patrick accept that Ireland’s General Government Debt to GDP will increase to 118.4% in 2013? Does he accept that this is 147% of GNP?

    [That’s what the latest IMF projection for Ireland, which was published on 2nd March 2012, says in relation to Irish debt:GDP]

    (2) Does Patrick accept that NAMA’s debt – its €30bn of bonds used to purchase loans from the banks – which represent 19% of GDP are presently excluded from General Government Debt? Does he accept that NAMA made a €1.1bn loss in its first year of operation and is facing continuing losses in the short term? That NAMA has made only €132m profit from the disposal of its best assets? That if NAMA has ultimately made a loss in 2020, that loss will be mostly charged to AIB and IBRC which we own? And that if NAMA debt were added to General Government Debt our debt:GDP would rise by 19% from 118.4% in 2013 to 137% and that our debt:GNP would rise to 171%?

    [Although NAMA’s debt is nominally backed up by assets, time has moved on since 2009 when we were keen to keep NAMA debt off the national debt. And in truth, the outlook for NAMA is not at all certain, residential and commercial property prices continue to decline in Ireland – by 17% and 10% respectively in 2011 and if it weren’t for the cut to commercial stamp duty in Budget 2012, the falls for commercial as well as residential in 2011 would have been greater than in 2010]

    http://namawinelake.wordpress.com/2012/03/27/at-last-governor-patrick-honohan-before-an-oireachtas-committee-to-account-for-anglo-promissory-notes/

  6. Earmarked civil service pay increments for 2012 for “satisfactory performance” in their jobs = 90 million. Amount collected so far by the government on the contentious household charge = 90 million. nuff said

  7. Thanks, Stephen, for highlighting the debt to GNP ratio.

    This is too often ignored even though it is the most appropriate measure for Ireland.

    I guess that it is ignored because it categorically shows that Ireland’s debt levels are unsustainable.

  8. @Eoin
    “Net debt/GDP is around 95% i think. Its actually a far more accurate measure, and though Eurostat doesn’t seem to like it, the IMF have referred to it in some of their recent publications.”
    I can understand Eurostat’s position. If I borrowed a hundred quid from you, blew ninety and still had a tenner in my pocket as I stood in the taxi queue, how much would I owe you?

    Broken bread is soonest eaten or something like that..

  9. @ Hogan

    eh, i don’t get the comparison there? Surely you would just adjust the debt/GDP level as the asset/cash gets used or abused?

    Would you view Norways debt/GDP ratio as any way meaningful given the rather large Oil Fund they own?
    Would you buy into the statistic de jour that Holland has the highest level of household debt, without also acknowledging that it has the highest levels of pension assets per household too?

  10. @ Tull

    “Why GNP rather than GDP?”

    cos it gives you a higher ratio obviously…

  11. @Eoin
    Well, I’m unlikely to hold on to that tenner I have left, so my net debt to you is not ninety quid, it is still a ton.

    Noraway could well be a case where they are prudent enough to consider net debt. Our NPRF vanished rather quickly when push came to shove leaving the reason it was set up in the first place as an unmentionable.

    However, it is not for Eurostat to make quantitative statements on the likely future prudence of one country over another. They don’t need to care that I am in a taxi queue just about to spend that last tenner or whether I have already put it in the cookie jar marked “repayment of hundred quid to Eoin”.

    Not should they. People borrow money to spend it, not as an offset against their, eh, borrowings… counting it early is not a problem as it is unlikely to be used for repayments…

  12. Eoin makes a valid point about net debt, but I’d argue the net debt/GNP would be an even better measure, simply because we’d like to factor in net factor income from abroad in the same way that the Dutch would like to factor out their pensions and the Norwegians their oil reserves.

  13. @Eureka
    “Your net debt is 100€ regardless of what you have in your pocket”
    Really?

    By what alchemy then does the government get to count the loose change in its pocket as an offset on its gross debt?

    I should probably ask the Alchemist…

  14. Hogan,
    Amgen has 24bn of cash on its balance sheet and 23bn of debt, what is the net debt position?

  15. @bond

    I don’t understand how net debt/GNP can be lower percentage wise than net debt/GDP. The value of net debt remains the same in each case. Surely the relationship should b the other way around.

  16. @ Alchy

    “Net debt/GDP is around 95% i think”

    i said net debt/GDP is lower than gross debt/GDP.

  17. @Tull
    I’m not arguing with how net debt is calculated.

    I am arguing that net debt is not a useful metric when the asset side is working capital. In Amgen’s case, if they are losing 26bn a year, then likewise a net debt of -1bn is not a useful metric.

  18. @Eoin Bond : You don’t accept that MNC flows, transfer pricing etc. distort Ireland’s GDP figures with respect to it’s European peers?

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