The Finance Dublin Debt Clock of Ireland ticks on still
See the Republic of Ireland's national debt mount up, a measure of the legacy the Irish Government is in the process of bequeathing to the children of Ireland:
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Ireland's national debt (NTMA definition - above) as a percentage of forecast 2013 GDP* (on the left, below), and as a percentage of 2013 GNP* (on the right):
| GDP | GNP |
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The key to a country's economic recovery and the restoration of financial normalcy is the stabilisation of the National Debt. The national debt rises if the Government spends more than it takes in, mostly in the form of taxes. If the Government balances its books, like most households, the national debt stops rising.
This situation is ultimately desirable in all countries, because it means that the Government is in harmony with the households of the country it governs. If not, the households in that country will ultimately fear that Government, because everyone intuitively knows that the Government will ultimately have to expropriate the wealth of those households to make its ends meet. When such fear, or worry, prevails over long periods of more than a few years countries' economies begin to implode because households and companies domiciled in the jurisdiction begin to lose confidence in the economic system of that country, and leave it, with negative impacts of the economy's growth and ultimate economic prospects.
Countries which, on the other hand, have surpluses on their Government accounts, as Ireland did from the mid 1990s to the mid 2000s, enjoy the confidence of its resident households and enterprises and enjoy superior growth, superior tax revenues, and falling debt - in short, a virtuous economic and debt cycle.
As long as a country's debt as percentage of its GNP and GDP remains on a rising trajectory, its economic prospects are worsening. Therefore, as the Finance Dublin Debt Clock on this page shows, the Irish economic prospect is currently worsening (mid 2013), because debt as a percentage of national income is rising.
The best that can be said for it, and this is what currently (2013) underpins the confidence in Irish Government bonds in the international bond market, is that there is an expectation that the debt to GDP ratio curve will peak out in a year or two, and, perhaps begin a downwards trajectory after that, as it did through the course of the 1990s - early 2000s, the foundation of the so-called 'Celtic Tiger' period.
But there is no guarantee that that will be the case, especially with a general election due in Ireland in 2016, and the perennial temptation to Irish political parties of financing their popularity through recourse to the creation of public debt. An assurance that a golden age of falling debt beckons would require fiscal discipline by the present Government, and for that to be shared by the so-called 'social partners'. Therefore, the confidence of bond markets still involves significant 'hope value' by investors in Irish Government debt. The Irish economy and its Government still has to deliver on the hopes currently being expressed in it by the international bond markets.
Ireland's national debt (2013) still lies on a high trajectory, primarily because of the low, or more accurately put, zero, productivity of Ireland's high levels of public expenditure, alongside a competitive private and FDI sector, as reflected in many world competitiveness indexes, such as those of the World Bank, and others.
The FINANCE DUBLIN Irish Government Debt Clock was set at midnight on June 30th 2009, when it was €65.278 billion. It updates the latest figures for the National Debt of the Republic of Ireland. The clock is re-set periodically, to reflect changes in debt and deficit estimates from the Dept of Finance, the National Treasury Management Agency (NTMA), and other bodies.
* Debt ratio definitions: (a) The GDP and GNP values used are the most recent money estimates (forecast) for the current year published by the Central Bank of Ireland (April 2013), (GNP: €135.79 bn; GDP: €167.536 bn). This latter forecast incorporates and are based on the latest national income estimates by the Irish CSO (March 21st 2013) for 2012, which calculated GNP growth for 2012 at 3.4% in volume terms, the fastest GNP growth in Europe by a considerable margin for 2012, and growth in the less economically significant GDP of a more modest 0.9%; (b) The debt total is the latest official 'National Debt', as defined by the Irish National Treasury Management Agency (NTMA). It differs from 'Gross Government Debt', (GGD) a concept generally used by Eurostat, and the EU for expressing debt figures in the EU. The above debt figure, as an expression of the public debt burden of the Irish economy (i.e. its leverage) is a more accurate measure of its indebtedness, expressed as a ratio of GDP/GNP. This is because the 'GGD' figure does not take into account Exchequer financial assets (including cash balances, sovereign wealth fund assets, and its revenue earning stakes in the domestic Irish banking sector such as equity and bank guarantee income). Other, higher, (gross) figures, which include private debt, (nevertheless relatively high in the Republic of Ireland's case) usually do not include external assets, while expressions of total private debt, including the financial services sector, are particularly inappropriate as a measure of the Republic of Ireland's indebtedness, as they account only for foreign liabilities, but not assets, of Ireland's International Financial Services Centre (IFSC).
Note: Impact of Promissory Note replacement with sovereign debt, announcement February 7th 2013: The event is a rescheduling of debt, that, while it impacts the time value of debt obligations in a positive way for the Irish Exchequer (estimated future interest savings by economic forecasters of between €500 million and €1 billion per annum, including the NTMA, the agency charged with managing the Irish sovereign debt) does not affect the nominal, monetary value of debt expressed in the debt clock figures above. The rescheduled debt proportion of the national debt above currently represents approximately 20 per cent of the total debt, and will fall to c.18 per cent within a year, at the current rate of deficit-fuelled debt accumulation that continues.
When leverage approaches 100 per cent of income, economies enter enhanced risk territory because their stability, and ultimate creditworthiness diminishes, because a relatively rapidly rising debt ratio places particularly severe limitations on an economy's ability to recover fiscal balance, as the experience of Ireland since this debt clock was established (in 2009), has shown - with debt rising from €67 billion (July 2009) to the level shown above.
8th February: Impact of Promissory Note replacement with sovereign debt
8th January: NTMA raises approximately a quarter of 2013 target funding in Syndicated Tap of 2017 bond, at 3.3 p.c. effectively marking the end of Ireland's lockout from bond markets
5th December: Reaction to the 2013 Irish Budget from analysts
14 November: Fitch is the first credit rating agency since the IMF bailout to adjust the credit rating outlook for Ireland from "negative" to "stable"
13 November: Bank of Ireland raises €1bn in covered bond market, in first public bond issue by an Irish institution in 3 years
8 November: Nobel Economics prize winner Pissarides addresses Irish Senate on youth unemployment
16 October: Editorial, Finance Dublin October: The Financial Transactions Tax fails all the tests
16 October: Ireland opts out of new FTT zone, along with leading nations globally
28 September: Deputy Governor of Irish Central Bank points to research that shows that spending cuts are most effective means of resolving Irish debt problems as Ireland prepares for its 2013 Budget.
26 July: Ireland returns to long term bond market for first time since IMF bailout, raising €5.23 bn in 5 year and 8 year maturities