Author: Seamus Coffey

Non-Financial Corporate Debt (updated)

The excess level of debt in Ireland gets a frequent airing.  Frequent reference is made to graphs like the following published by McKinsey.

Ireland has an excessive level of debt but it is the figures attributed to the financial and non-financial corporate sectors that push us into the stratosphere.

Outside of some coverage issues in relation to the general government debt, there is relatively broad agreement about the excessive debt levels in the household and government sectors.

On the issue of Non-Financial Corporate Debt there was a useful session of the Joint Oireachtas Committee on Finance on the 7th of March.  The committee heard from Michael Connolly from the CSO and Joe McNeill led a group from the Central Bank. 

The transcript of the debate is here, and the intended text of the opening presentations as well as the slides used by Joe McNeill are here.  Michael Connolly also used slides but I have not seen them.  I will add a link if someone has it.

The debate meanders at times and a couple of misperceptions are persisted with by some of the Members but there are many useful contributions from the witnesses.  A couple of quotes are provided  below the fold but there was much more discussed.

The conclusion is straightforward.  The non-financial corporate debt burden is not as large as dramatic graphs similar to that above like to indicate.

UPDATE: Michael Connolly has kindly provided the slides he submitted to the Committee.  Slides 7 to 13 are particularly relevant and are very useful contributions on this issue.

Continue reading “Non-Financial Corporate Debt (updated)”

Patrick Honohan on Household Indebtedness

The Governor of the Central Bank, Professor Patrick Honohan, delivered a speech to the Limerick Law Society in the University of Limerick this evening.  Both the speech and some accompanying slides are available.

Household Budget Survey

The CSO have released the first results of the most recent HBS which was taken between August 2009 and September 2010.  There is also this press release.

Average weekly expenditure is estimated to be €810 per week or around €42,000 per year.  The release contains lots of detailed information by income decile, region, location and household tenure.

Matthew Elderfield on Mortgages

Financial Regulator, Matthew Elderfield made a speech yesterday to the Harvard Business School Alumni Club of Ireland.  The speech dealt with several aspects of the ongoing mortgage crisis and can be read here (pdf here).

Two extracts worth considering are below the fold but there are lots of interesting elements to the speech. 

Continue reading “Matthew Elderfield on Mortgages”

IMF Fifth Review

The fifth review of the Extended Arrangement with Ireland can be read here.  The debt sustainability analysis on pages 35-40 shows little changes from that provided in the Fourth Review.

The Baseline Scenario is identical and extends to a projected gross debt ratio of 109% of GDP in 2017 (net debt 101% of GDP).  The growth shock shows that if annual growth is close to zero (0.1% per annum) the debt would be 138% of GDP in 2016 and still rising.

The performance criterion for the end-June 2012 Exchequer Primary Balance remains €9.0 billion.  The outturn to the end-June 2011 was €8.4 billion.

Page 9 shows that we had a €4.3 billion budget last December once the full effect of tax carryover effects are included.

The budget implies a consolidation effort of €4.3 billion (2¾ percent of GDP) in 2012—including the full €1.1 billion carryover from 2011 tax measures—which significantly exceeds the €3.6 billion effort originally programmed.

Box 3 (page 20) on Social Welfare: Scope for Reform is also noteworthy.  The four paragraphs in the section begin:

The Irish state provides significant support to low-income groups.

This protection has come, however, at a high fiscal cost.

Importantly, the current system generates poverty traps for some groups, while providing less targeted support to others.

Potential reform options include moving toward more a means-tested and integrated approach to social welfare payments.

UPDATE: The transcript of the conference call with Craig Beaumont, IMF Mission Chief for Ireland can be read here.  There is also a separate short interview from the IMF Survey Magazine here.