That's true but because we were so heavily exposed to construction, financed by cheap money, we suffered more than most. The fact that we had seen a decade of massive increases in public spending, the vast majority of which was in wage increases, meant that the impact lasted much longer than it should have. The banking/ financial crisis gave us €40-€50 billion of debt, public sector wage costs, very high welfare rates and massive increases in health spending (with no discernible improvement in outcomes) gave us the other €150-€160 billion. Yes, the crash was beyond our control but the impact of the crash was largely our own fault.
Public sector spending was too high, but not by the amount you identify. If you are assuming that all national debt is wasteful then you are saying we should not have a public sector at all. Sometimes it pays to borrow and invest.
Borrowing to pay for specific once off capital projects is one thing... borrowing to pay for day to day expenses or salaries is not investment. It's creating an unsustainable burden.
Seriously? National debt is always looked at in relation to GDP. If GDP increases by over 100% and the national debt increases by 1% that is a reduction of 50% in the debt to GDP ratio (the measurement that really matters).Another myth. A 1% increase in national debt from 43,599 €m (1997) to 44,056 €m (2004) isn't a reduction of the national debt . While the debt to GDP ratio decreased under Mr McCreevy's stewardship, this was due to the increase of Ireland's GDP from 73,092 €m (1997) to 156,143 € m (2004), i.e. a 114% increase, not a decrease in national debt itself.
That's a serious assumption and bit of a leap!If you are assuming that all national debt is wasteful then you are saying we should not have a public sector at all.
Sometimes it does. Committing to long term expenditure which is funded by capital tax windfalls and/or borrowing is never a good idea. During the latter stages of the boom Public Sector wages increased by 50% (tens of billions). That's hardly a minor factor.Sometimes it pays to borrow and invest.
It has always been like that.
A cousin of mine won a sporting event many years ago. There was a quarter page article in one of the national papers the following day. He was
quoted extensively about how delighted he was, how all the hard training was worth it, how grateful he was to his coach, family, supporters etc.
All completely made up by the reporter, who never spoke to him. The quotes were all just platitudes, nothing controversial, journalist just couldn't be bothered to speak to his supposed interviewee.
the press largely trades in stereotypes, occasionally some real news emerges to change direction and off the media goes with the new stereotype. The prime example in recent years has been the treatment of the clergy. When I was young, they could do no wrong, nowadays they can do no right.
It is important to point out that there are some real journalists who report real news even when it does not conform to the expected view. Kitty Holland is my current favourite. There are even some opinion piece writers who have something original to say.
Another myth. A 1% increase in national debt from 43,599 €m (1997) to 44,056 €m (2004) isn't a reduction of the national debt .
During the latter stages of the boom Public Sector wages increased by 50% (tens of billions). That's hardly a minor factor.
You were going well until you mentioned Ms Holland, who wrote an entire book on the death of Savita Halappanavar without a single mention of Dhara Kivlehan - who two years previously had died of the same condition and in the same circumstances as Savita, nine days after giving birth to her son at Sligo Regional Hospital - because to do so would have ruined Holland's use of Savita's tragedy to campaign for abortion.
You were going well until you mentioned Ms Holland, who wrote an entire book on the death of Savita Halappanavar without a single mention of Dhara Kivlehan - who two years previously had died of the same condition and in the same circumstances as Savita, nine days after giving birth to her son at Sligo Regional Hospital - because to do so would have ruined Holland's use of Savita's tragedy to campaign for abortion.
However campaigners are allowed to use facts to bolster their case. Kitty Holland's work in the Savita Halappanavar was certainly not lazy. She brought an important case to the public attention. A case which has implications far beyond the abortion debate. Thats good journalism and can be recognised as such whatever your views on abortion.
As I said, Mr McCreevey didn't have it. He just created a massive deficit, i.e. an accumulated budget deficit of 13,178 €m during his ministry.How is it possible to spend money you don't have without any significant change in the national debt?
If he was spending money like it was going out of fashion, why was McCreevy packed off to Europe?
Hi PMU, The point was made that the national debt was reduced in real (and percentage) terms. A 1% nominal increase over this period is well below the rate of general inflation, so in real terms, I believe the debt was reduced.
We should have been running a €10 billion surplus in order to cool the economy. We should measure our expenditure relative to GNI, not GDP and we certainly should not use windfall taxes from a capital boom to fund long term current expenditure commitments. If we did that then in the 5 years running up to the crash we should have had an extra €30 to €50 billion in our reserves and the borrowing requirement after the boom whould not have been so large. If we ran our economy before the crash in the way the Troika forced us to run it post-bailout our debt would be significantly lower. My guess is 30-50% lower but I'd love to see a study on it.When the crash came we were then exposed to a €20bn expenditure deficit and subsequent bailout. But it would have made no economic sense to run €20bn surpluses (i.e no increases in public spending via wages, recruitment, welfare rates, welfare programs etc...) in anticipation of a collapse in the construction industry.
As I said, Mr McCreevey didn't have it. He just created a massive deficit, i.e. an accumulated budget deficit of 13,178 €m during his ministry.
The national debt is a balance sheet figure; the budget deficit is an income statement figure. The Minister for Finance finances the budget deficit through borrowing, i.e. through foreign liabilities.
There is a big difference between nominal and real debt / inflation. My parents bought their house with a mortgage for about 5k back in the day. Their last mortgage repayment was something like 50 quid a month. Back when they took out the mortgage this 50 quid a month was a fair bit of money. By the time the last repayment was made it was nothing.That's what a text book tells you, but in real life, money is money.
From here https://countryeconomy.com/deficit/ireland. You can also get them on Eurostat.It still doesn't add up to me - where are you getting your figures from?
You can look at the budget deficit as an overdraft on your chequebook and the national debt as accumulated interest you owe on your overdraft. If interest rates fall, you can pay off accumulated interest, i.e. your personal national debt is reduced, and at the same time you could convince your bank manager to increase the level of your overdraft, i.e. to increase your personal budget deficit.If he financed this significant deficit spending through borrowing, why didn't the national debt in real money increase significantly during his term in office?
They do. The web site you referenced https://tradingeconomics.com/ireland/government-budget correctly tells you that: “Ireland recorded a Government Budget deficit equal to 0.70 percent of the country's Gross Domestic Product in 2016. Government Budget in Ireland averaged -3.20 percent of GDP from 1995 until 2016, reaching an all time high of 4.90 percent of GDP in 2000 and a record low of -32.10 percent of GDP in 2010.”This information shows little or no budget deficits from 1997 to 2004: https://tradingeconomics.com/ireland/government-budget http://www.finfacts.ie/irishfinancenews/article_1028925.shtml
If this were correct why is there an EU Stability & Growth Pact? If you can just inflate debt away why doesn't everybody do it? The purpose of the SGP is to reduce the ability of eurozone members to introduce inflationary pressures in their economies and to require 'close to balanced' budgets. That's one of its benefits. No future Minister of Finance will be able to create massive budget deficits as Mr McCreevey and Mr Cowen did. (Unless we leave the Eurozone.)There is a big difference between nominal and real debt / inflation. My parents bought their house with a mortgage for about 5k back in the day. Their last mortgage repayment was something like 50 quid a month. Back when they took out the mortgage this 50 quid a month was a fair bit of money. By the time the last repayment was made it was nothing. Likewise with the national debt. If we could even stop borrowing and just maintain our current level of debt, in 20 years or so it wouldn't be problem.
It's an illusion to believe you can inflate debt away.
There is a big difference between nominal and real debt / inflation. My parents bought their house with a mortgage for about 5k back in the day. Their last mortgage repayment was something like 50 quid a month. Back when they took out the mortgage this 50 quid a month was a fair bit of money. By the time the last repayment was made it was nothing.
Likewise with the national debt. If we could even stop borrowing and just maintain our current level of debt, in 20 years or so it wouldn't be problem.
I believe the EU has an inflation target of 2% and with QE I expect this will come about eventually.If this were correct why is there an EU Stability & Growth Pact? If you can just inflate debt away why doesn't everybody do it?
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