# economic enlightenment from politicians



## Haille (14 May 2007)

Know nothing about economics but could someone out there [preferably a politician] enlighten me  on the following.What has Ireland's National Debt.been each year over the last 10 years.Is it falling,has it remained at the same level, do some parties have plans to increase it after the election?  Are there any plans to clear this debt by any political party? If one ran ones personal financies like past goverments surely one would have to make an urgent appointment with consultant E.Hobbs.
     I also want enlightment about E.C.B. rates.My understanding is E.C.B.rates will rise again next month.This I am told is influenced by a stronger German economy and a desire to keep German or EU inflation rates down?  Why have not the increased  E.C.B interest rate increases succeeded in keeping Irish inflation rates down.? Is Ireland insignificant or are German inflation rates more important?   During the height of the Celtic Tiger ECB rates were low,Ireland's inflation rates were low.When rates have gone higher our inflation rates seem to have increased.An explanation please.


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## KalEl (14 May 2007)

The National debt has fallen as a percentage of our GDP making it less relevant. Fianna Fail are proposing to eliminate it completely if re-elected.
The high rate of inflation here is ironically due to increased mortgage repayments and things like gas and electricity.


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## Purple (14 May 2007)

KalEl said:


> The high rate of inflation here is ironically due to increased mortgage repayments and things like gas and electricity.


And massive increases in public sector spending and massive increases in public sector pay.


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## shanegl (14 May 2007)

Yep, that 5% figure you see quoted includes the increased cost of mortgage repayments, and is completely useless IMO.


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## Howitzer (14 May 2007)

Strangely enough Estonia is being prevented from joining the Eurozone because of a very similar inflation rate, with very similar reasons for it as us.

[broken link removed]


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## wolfspeed (14 May 2007)

Ireland's economy is really insignificant in comparison to some of the other EU states - like Germany etc. If you think about it, you could take the whole population of the island and we would fit into an area the size of Greater Manchester (with some space left!)


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## Protocol (14 May 2007)

National Debt.

For info, see www.ntma.ie

Our public debt is about 40 billion, it has been roughly stable over the last few years.  As our national income (GDP) is now over 160 billion, then our debt is approx. 25% of GDP. This is very low, which is why the debt is not a worry and nobody really talks about it anymore.


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## Protocol (14 May 2007)

On the ECB interest rates query, yes, it is a bit odd that raising interest rates to keep a lid on European inflation actually has the *perverse effect* of increasing Irish inflation.

Seehere:
[broken link removed]

If you look at the table, our CPI has increased by 5.1% in the year, but the HICP has increased by just 2.9%.

Our CPI measure of inflation includes the cost of mortgage interest, whereas the EU's Harmonised Index does not.


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## Protocol (14 May 2007)

Also, have a look at page 3 of the CSO's inflation data (above).  You will see that goods price inflation in Ireland is practically zero.

All our inflation is in services (9.1%).


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## PMU (14 May 2007)

On the national debt it’s nothing to do with politicians. The Maastricht Treaty specifies what the national debt (i.e. the general government deficit) can be and it must not exceed 3% of GDP.  We signed up to this, so that’s what national debt cannot exceed. The monetary policy of the ECB is available on its web site: “_The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term_.” It’s been successful in this and you can check euro zone inflation rate on the ECB web site. Basically the IE inflation rate doesn’t count significantly at the European level, no more than the inflation rate in Cloughjordan counts at the Irish level.


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## Afuera (14 May 2007)

I think that due to privitazation and the selling off of many state bodies in recent years the national debt has been cut right down and is no longer a great worry. The increase in private debt through looser lending standards though in the interm is definately worrying. Since private debt is running so high at the moment, interest rate hikes have a disproportionate effect on inflation in Ireland.


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## KalEl (14 May 2007)

Afuera said:


> I think that due to privitazation and the selling off of many state bodies in recent years the national debt has been cut right down and is no longer a great worry. The increase in private debt through looser lending standards though in the interm is definately worrying. Since private debt is running so high at the moment, interest rate hikes have a disproportionate effect on inflation in Ireland.


 
Beware of listening too much to the harbingers of doom re. private debt...after years of hearing about worrying rises in credit card debt I only found out last week the figures include balances which are cleared each month, and that more relevant figures like amounts incurring interest aren't available!
That's ridiculous...everyone uses credit cards more mowadays for tickets, travel, online shopping etc. I clear my account every month yet I'm in there with the "worrying" statistics!


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## Afuera (14 May 2007)

KalEl said:


> Beware of listening too much to the harbingers of doom re. private debt...after years of hearing about worrying rises in credit card debt I only found out last week the figures include balances which are cleared each month, and that more relevant figures like amounts incurring interest aren't available!
> That's ridiculous...everyone uses credit cards more mowadays for tickets, travel, online shopping etc. I clear my account every month yet I'm in there with the "worrying" statistics!


This doesn't explain why we're so out of whack with the rest of the world though. I'm assuming that this is the standard way for these measurements. In Ireland private debts are running at nearly 150% of disposable income. You'd be hard pushed to find anything comparable to that anywhere else.


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## Protocol (14 May 2007)

Note that the Maastricht treaty set down the rules, or convergence criteria, for joining EMU.

It is the Stability and Growth Pact that sets down govt borrowing guidelines.

Yes, in general, there is a ceiling of 3% of GDP that govts can borrow each year.  This prevents debts from rising too fast.

However, the existing level of debt is a legacy of past deficits.  Some countries have debts of up to 100% of GDP.  This is above the Maastricht treaty's convergence criteris of 60% of GDP.


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## Protocol (14 May 2007)

Yes, I agree, rapid rises in private debt may be more of a concern that the 40 billion in public debt.

Some may hype this up, others play it down, but the facts are that private sector debt has grown very fast.


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