Monday, May 14, 2012

15/5/2012: Austerity, Stimulus & Euro Area Crisis

An excellent article for Bloomberg by Peter Boone and Simon Johnson, titled As European Austerity Ends, So Could the Euro.

Note the referencing of 90% debt/GDP ratio for the euro area. In 2012, per IMF more detailed WEO database, General Government Gross Debt in EA17 will rise to 89.95% of GDP from 88.08% in 2011. For EA12 (old euro area member states), the GGD will rise from 88.75% of GDP in 2011 to 90.61% of GDP in 2012, while removing Luxembourg out of EA12 (the country is a massive outlier for virtually all GDP-related parameters due to its huge 'brass plate' sector), implies EA11 debt to GDP ratio of 90.915% of GDP in 2012, up from 89.06% in 2011.

In addition to Table 5 in the GFSR (linked by Boone and Johnson), I suggest you take a look at the Statistical Table 9.a on page 69 of the report, especially columns 2-5. These detail parameters of sustainability of unfunded future health and pensions obligations.  Ireland, with its 'demographic dividends' is fourth worst-off country in the EA17 in terms of future pensions liabilities increases, although we are much better than average in terms of health liabilities.

Table 10.a page 71 of the said report (reproduced below) shows that Ireland is facing the worst 
Required Adjustment and age-related spending, 2011–30 and 2011-2020 horizon in the advanced economies, save for Japan and the US.

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