# How can Morgan Kelly get his €250 billion of government debt so wrong?



## Brendan Burgess (20 May 2011)

I remember reading that figure and wondering where on earth did it come from? It had taken me some considerable effort earlier on in the year to reconcile the various figures being bandied about the media on the National Debt which I summarised in this Key Post.  This was the reason for setting up the forum on Key Economic and Financial Data so that our discussion would be informed by data and not by guesses.  I suggested to the Dept of Finance and the NTMA that it should not be up to me to do a fairly simple reconciliation of debt figures and that they should do it. I see now that they published an [broken link removed] on government debt on 10 May.

In an excellent article in today's[broken link removed] Anthony Leddy and Brendan Walsh suggest that the figure will be €161 billion and not €250 billion. These are not due to their being optimistic and Morgan Kelly being realistic. They use the same assumptions - it's just that Morgan Kelly gets his arithmetic wrong. 

*Ireland's General Government Debt in 2014*


|Morgan Kelly|NTMA|Kelly's error
 Gross general debt in 2014|190|202|-12
Plus Nama's liabilities|45|30.7|+ 14
Plus further bank recapitalization|+35|0|already included in Gross General Debt so Kelly is double counting 
  - value of NAMA's assets and value of banks|-50|-40
- non NTMA cash |0|-16|Kelly just ignored this
- NPRF investments excluding investment in banks||-15|Kelly just ignores this

  + contingency provision|+30|| Kelly did not explain
net general government debt 2014|250|161|+89k 
% of GDP|143%|92%|Given the trouble I had in getting the actual figures back in February, I can understand how difficult it is to get this information. 
Given the complexity of the information, I would expect that the above table may well need some correction. 

 But because of the huge credibility he has with many commentators, Morgan Kelly needs to be careful. 

We are in a very serious economic situation but economic policy should be based on the true figures not on wild estimates. There is a serious danger that he could panic the government into the wrong policy decision.


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## DerKaiser (20 May 2011)

I reckon he's assuming two main things:

1) NAMA Assets are worthless
2) All of the money (including contingencies) earmarked for the banks in the €85bn package will be used and lost

As Colm McCarthy pointed out, even knowing the ultimate figure no one can say with certainty whether we'll default.

If :
1) We renegotiate the interest on the €85bn 
2) no one comes knocking on our door for capital repayments for a very long time 
3) economic growth picks up

we might muddle our way through this with an €8bn p.a. interest bill.

If, on the other hand, the economy deteriorates further and interest rates push up, we'll get into a vicious circle from which we can't return.


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## Brendan Burgess (20 May 2011)

Hi Der Kaiser

This is not a questioin of whether he is just more pessimistic than we are. 

This is arithmetic. 

He omitted the €16 bn cash NAMA has on hand. 
He included €35 bn for  bank recapitalisation twice. 
He used a figure of €45 bn for NAMA's liabilities when they are only €30 bn.
He adds a €30 billion figure with no explanation. 


He appears to  accept, in his calculations, that NAMAl's assets are worth €30 bn. (Though he doesn't really get into that detail).

The only arguable figure here, although he doesn't actually argue about it, is the value of the NPRF's proposed investments in AIB, BoI and PTSB. He ignores them. If he argued that they were worth nothing, fine, but he doesn't even do this. These would account for only €15 bn of the difference anyway.

Brendan


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## Mpsox (20 May 2011)

There was a similer article in one of the Sunday papers at the weekend which rubbished his figures as well, (sorry, can't locate a link). In particular they highlighted the makey-up €30bn.

As for NAMA assets, they're not worthless and some value will be returned from them. In particuler, assets outside of Ireland in economies which will recover faster then ours may not actually do too bad


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## Brendan Burgess (20 May 2011)

Hi Mpsox

[broken link removed]

Maarten van Eden is chief financial officer at Anglo Irish Bank until the end of this month


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## Taxi Driver (21 May 2011)

I think Mpsox may be referring to this.

[broken link removed]


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