In answering this question (table below), I use the following comparatives:
(1) Current and forecast GDP and GDP per capita levels and growth rates;
(2) 2008 and 2009 budget deficits; and
(3) Relative extent of committed liabilities under various national rescue plans.
The estimates are presented under two scenarios for Ireland:
- 'Benign' scenario implying IMF/external funding of 10% of the 2008 GDP which will cover ca 30% of committed state liabilities for 2009; and
- 'Average' scenario consistent with 25% of GDP borrowing covering ca 75% of liabilities).
Finally, it is worth noting that I do not 'price-in'
- the effect of deeper economic contraction in Ireland than in some of the reference countries;
- the effects of higher public spending as a share of the domestic economy in this country relative to the reference countries; and
- factors relating to inflation differentials and currency adjustments (note that all countries in receipt of IMF loans have had significant currency devaluations, while Ireland had a significant currency appreciation).
To date, the only sign of any 'austerity' measures coming from the Department of Finance is a vague rumor that Brian Cowen is looking for a 5% wage bill cut in the public sector. Whether or not this figure is gross of the wage increases granted in the latest Partnership agreement is a moot point, given the austerity measures of 15-20% estimated above.