Economics 5/12/10: Debt, debt, debt... for Irish taxpayers

I decided not provide any analysis of the figures below. These figures speak for themselves. To explain their purpose: I have computed the expected burden on current and future taxpayers from the total ex-banks debt carried by Ireland Inc as:

• Households debts (mortgages, car loans, personal loans, credit cards, etc);
• Government debt (inclusive of quasi-Governmental debt undertaken under the EU/ECB/IMF loans and Nama).
  
• I also incorporate total corporate sector debts, including non-financial corporations debt and debts entered into by non-banking financial corporations. However, the corporate debt DOES NOT form the part of taxpayers liabilities, although at least some of it will have to be repaid out of our (taxpayers) pockets one way or another.

All figures input into calculations were taken from CSO and Central Bank of Ireland databases. All core assumptions are outlined in the second table.

Finally, note - the total figures of debt per taxpayer are for Household Debts and Government (including Nama & ECB/EU/IMF loans) debt. Do not, please, confuse them with the official Government debt alone.

So here are two tables. Interpret them as you wish:


PS: some people accused me of double-counting:

• banks debts and mortgages/households debts. I am not - banks debts are excluded from the above considerations;
• Government bonds outstanding and rolled over. I am not - the only net increase between 2010 and 2014 in Government debt due to roller overs of existent (pre-2011) bonds is due to an increase in the interest rate taken on rolled over bonds at 1% (again, conservative, as per ECB/EU/IMF deal we will be paying 1.13% over the current average rate of interest on already issued bonds).
  

Economics 03/02/2010: International hype around Ireland's Fiscal Policies

Nouriel Roubini - an economist I would regard extremely highly, writing today in the Financial Times (a paper I would regard extremely highly) clearly illustrates the point that to international observers, Ireland is hardly important enough to actually engage in fact-checking (here).

"The best course would be to follow Ireland, Hungary and Latvia with a credible fiscal plan heavy on spending cuts that government can control, rather than tax hikes and loophole closures that depend on historically weak compliance. ...This approach is working in Ireland – spreads exploded as public debt ballooned to save its banks, but came back in as public spending was cut by 20 per cent."

Really? We haven't noticed. And neither did the Department of Finance.

First off - Irish fiscal adjustment to date is approximately 50:50 split between higher tax burden and spending savings.

Second, there has been no net reduction in public expenditure in Ireland since 2008. None, folks. Let's face the music performed for us by the Department for Finance. No spin from me. In its "Ireland – Stability Programme Update, December 2009" available to all (including Professor Roubini here) DofF provide some stats.

Start from the top: page 14 of SPU:
Clearly, no sign of decreasing expenditure in sight. Of course there are many reasons for this, but hey, where's that 20% cut? Or 1% cut? None through 2009.

But may be Prof Roubini is talking about future cuts of 20%? Ok, page 20 shows future expected expenditure figures per Budget 2010.
So clearly, neither Gross, nor Net current expenditure are set to fall from 2009 through 2014. Not on a single occasion.

On Capital expenditure side, there are severe cuts. So much is true. But a cut between 2009 and 2010 is just 10.7%, not 20%. The cut between 2009 and 2011 is 23.8% but that is only accounting for 3.11% of the total Net expenditure of the state in 2011. Where's that 20% cut in total expenditure coming from, folks?

DofF plans for a 2.8% cut in the General Government Balance in 2010, not a 20% cut either, and that will leave us (per their rosy forecasts on growth and tax revenue) at 11.6% deficit relative to GDP, down a whooping 0.1 percentage point on 11.7% deficit achieved in 2009.

Oh, yes, while Anglo Irish Bank transfers in 2009 (to the tune of €4 billion) enter the DofF estimates for General Government Balance, there are no provisions for the same anywhere in DofF projections for 2010 (see Table 1c, page 38). So pencil that in and you have No Reduction in Deficit in 2010! In fact, with banks supports still required, 2010 is likely to see an increase in deficits.

Take a look for yourselves:Notice that pesky number on borrowing requirement rising in 2010 on 2009? If Prof Roubini is correct, why would the Government that managed to cut its spending by 20% increase its borrowing by 3%? Unless the revenue side is expected to fall by more than 20%! But no, DofF expects total tax revenue to decline by 4.7% in 2010 (Table 1b, page 37).

Finally, Table 1d on page 40 shows that spending adjustments per Budget 2010 amount to the net of €-4,051,059. Of course, since then we have learned that some of the cuts will not be implemented, reducing this number to some €3.3 billion. But even at a higher level, estimated by the DofF, the adjustments add up to only 8.55% of the Net Voted Total Expenditure, or 6.42% of the Gross Total Expenditure in 2009.

Not even a half of Prof Roubini's 20%!

Hmmmm... someone has been fooled by the PR machine statements coming out of Dublin.

Economics 17/12/2009: The latest on our Knowledge Economy

I will be blogging on the latest story from the 'emerging' economy of Ireland - emerging, allegedly from the recession - in a few hours time, so stay tuned. But for now, while cooking the dinner for my 3-year old let me bring to you the latest news from the 'Knowledge' economy Ireland.

Now, as a researcher I must admit, I know first hand that electronic editions of scientific journals are the sole source of published refereed research material I consult on a daily basis. Physical copies are too hard to use in modern research and archiving. And they arrive with a significant delay. And are environmentally less sustainable than e-versions.

Thus, electronic journals access is a must for any modern research in any field.

And here comes a bomb: Access to e-journals might be dropped by Irish Universities in 2010. Courtesy of the Science and Research strategy from the Government that just a week ago was science and research as the main strategy for our economic revival.

Here are the details from a leaked memorandum... I suppress personal names...

"Dear Fellows and Fellows Emeriti,

This note has been prepared by Dr F.B. of ... (Academic Department).

...alerting all interested parties including students that the Irish Government is about to burn the books. The universities of a knowledge based society must have access to electronic journals.

signed DMcC
Chairman of ... (academic body)


Dear All

Last night the Librarian ...briefed the Fellows on the current state of play with regard to the IREL/ on-line journal access service.

The position is not good and could have serious implications for staff and students at all Irish universities.

Briefly and from memory, the facts are as follows.

The service costs about €8-€8.5 million a year. Up to now, about €4.5m of this has been paid by SFI for science technology and medicine titles, but SFI have always said that their commitment was in the form of seed money and are now withdrawing their support. The HEA, which paid €4 million for humanities and social sciences titles are also stretched. But they may come up with some money. The worst case scenario may be €2 million, the best €3.5 million all from the HEA.

The IUA have been approached about bridging the gap, but either cannot or will not provide the ~€5+ million needed.

...In the short end of the medium term it will cripple research activity and undermine teaching in most areas throughout the universities...

Signed: FB"

Let me give you my quick 5-cents on this. E-journals access in Ireland is already relatively restricted compared to the US & UK universities. Cutting what we do have access to will simply mean plunging our science into the dark age of physical print, slow mail and distant archiving. In the age when Google and Microsoft are racing each other to put libraries on line, and IDA is promoting Ireland as a knowledge and innovation campus for global business, the savings of some €5-6 million at the cost of disconnecting Irish science and students from the rest of the world is just mad.