Current Budget Deficit - exchequer statements

D

DerKaiser

Registered User
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Having looked at the October statement, we are about €11.7bn in deficit on the current account.

Looking at last year the current deficit did not increase over the final 2 months of the year, presumably due to the self assessed tax returns. These will be well down this year, but it is conceivable that it will be no more than €13bn.

Rather than set the total deficit to 3% of GDP by 2014, would it not make more sense to aim set the current budget deficit to 0% and come up with a sensible capital budget plan separately (and maybe limit that to a deficit of 3% GDP)?

I think the spirit of balancing the current budget and only borrowing to invest in capital projects would be more appropriate.

Also, does anyone have a sneaking feeling that the €15bn adjustment will turn out to be more like €12bn-€13bn when the final figures are compiled for 2010?
 
No, I think the 15BN figure will increase as it is based on optimistic growth predications.

This entire process has been about pushing this out as far as possible in the hope Portugal bailing before us, or a recovery in the global economy. The 15BN figure is part of that IMO.
 

I agree with you. If the €15bn were based on zero growth it would be a more realistic effort.

I'm also very much in favour of your suggestion DerKaiser. I am living in hope that by the end of this crisis it will finally be proven by experience that fiscal austerity, not imprudent and rampant deficit spending, is the only way out of a crisis and that Keynesianism will finally be dead. Germany is already proving this, here's to hoping that Berlin doesn't make a sudden u-turn.
 
Background info:
http://www.finance.gov.ie/documents/exchequerstatements/2010/Endoctstatement.pdf
[broken link removed]

Looks like the current budget deficit is forecast at €13.5bn for 2010, November income tax returns might change this though.

Also, I'd forgotten that the cost of servicing debt in 2011 will be significantly higher than 2010 (+€1.5bn) and this will mean that a €6bn adjustment will only reduce the deficit by €4.5bn at best, having allowed for the higher cost of interest alone.
 
That's the main reason why they have to frontload the cuts.
 
shnaek said:
That's the main reason why they have to frontload the cuts.
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It makes a mockery of the 4 year plan also when you think of it. Who knows what rate of interest government debt will get rolled over at!
 
DerKaiser said:
It makes a mockery of the 4 year plan also when you think of it. Who knows what rate of interest government debt will get rolled over at!
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Good point. Not only will we have to look at the predicted growth rate, but we will also need to look at the predicted interest rate on new lending. My prediction is that they will be too optimistic, but lets see what happens.
 
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