Since the disastrously vacuous summit last Thursday and Friday, there has been a barrage of 'Ireland is special' statements from Merkel and other political leaders. The alleged 'special' nature of Ireland compared to Greece, Portugal and Spain is, supposedly, reflected in Irish banks being successfully repaired and Irish fiscal crisis corrected to a stronger health position than that of the other peripheral countries.
I am not going to make a comment on the banking system's functionality in Ireland compared to other states. But on the fiscal front, let's take a look. Per IMF:
- In 2012 we expect to post a Government deficit of 8.30% of GDP against Greece's deficit of 7.52%, Portugal's 4.99% and Spain's 6.99%. We are 'special' in so far as we will have the highest deficit of all peripheral countries.
- In 2013, Ireland is forecast to post a Government deficit of 7.52% of GDP against Greece's 4.67%, Portugal's 4.48% and Spain's 5.67%. Once again, 'special' allegedly means the 'worst performing'.
- In 2012, Ireland's structural deficit would have fallen from 9.31% of potential GDP in 2010 to 6.15% - a decline of 3.16 ppt. For Greece, the same numbers are 12.12% to 4.53% - a decline of 7.59 ppt or more than double the rate of austerity than in Ireland. For Portugal, these numbers are 8.96% to 4.09% - a decline of 4.87 ppt of more than 50% deeper reduction than in Ireland. For Spain: 7.32% to 5.39% - a drop of 1.93 ppt or shallower than that for Ireland.
- In 2013 in terms of structural deficit, Ireland (5.38% of potential GDP deficit) will be worse off than Greece (-1.06% of potential GDP), Portugal (2.28%) and Spain (3.52%)
Now, run by me what is so 'special' about Ireland's fiscal adjustment case?
Can it be that we are 'lighter' than other peripherals on debt?
- 2010 Government debt in Ireland stood at 92.175% of GDP and this year it will be around 117.743% - up 25.255% of GDP. For Greece this was respectively 144.55% of GDP in 2010 and 170.731% in 2012 - a rise of 26.181%, marginally faster than that for Ireland. For Portugal, gross Government debt was 93.32% of GDP in 2010 and that rose to 119.066% in 2012, an increase of 25.746%. Again, not far from Ireland's. And for Spain, these numbers were 61.316% to 90.693% - a rise of 29.377%. So while Spain is clearly the worst performer in the class, Ireland, Greece and Portugal are not that far off from each other.
Wait, what about economic reforms and internal devaluations? Surely here Ireland, with its exports-focused economy is a 'special' case?
- In 2012, Ireland is expected to post a current account surplus of 1.813% of GDP, against deficits of between 0.148% and 2.909% for the other three peripheral countries. This, of course, is not the legacy of Irish reforms, but of the MNCs operating from here.
- However, in terms of current account dynamics, Ireland is not that special. Between 2010 and 2012, Greece will reduce its current account deficit by 4.294 ppt, Ireland will improve its external balance by 0.674 ppt, Portugal by 7.105 ppt and Spain by 2.278 ppt. So Ireland is the worst performing country of four in terms of current account dynamics, while the best performing in terms of current account balance.
Now, do run by me what can it possibly mean for Ireland to be a 'special' case compared to Greece, Portugal and Spain?
6 comments:
Good man Constantin, consistently delivering the raw facts. Essentially the Barnum & Bailey's showpiece starring Enda & Angela in what amounted to no less than a "tell them what they need to hear" reaction. Mushroom culture politics - keep them in the dark and feed them shit.
A good analysis. I wonder though, do those figures still show Ireland in as bad a light if you remove the socialisation of private debt?
In other words; how would the Irish deficit compare with others (2012 or 2013) if our government was not paying off the debts of private financial institutions?
I'm not making a value judgement here about whether we should be paying those debts (personally I don't think we should be, but that's another discussion). Rather, I'm suggesting that perhaps Ireland is in better shape than the others when bondholder payments are excluded. Therefore, if we could sort out that particular issue; the suggestion that Ireland is doing well might not sound so silly.
This is why I am focusing on 2012-2013, not the periods when our deficit was incorporating the banks debt assumption. Ditto for structural deficit. Furthermore, we made the decision to absorb banks debt. It's ours to carry now. In 2012 we did not pay promo note. In addition, other countries have provided support for their banks as well. Not on the same scale as us, but in timing included in their figures above.
Many thanks for the response. My parents emigrated in the early 80s when I was still at school and I grew up abroad. In 2006 I decided to return to Ireland as I'd never lived here as an adult. Talk about bad timing!
Now I'm considering leaving again.
That said, I may stick it out... I think Ireland might be a good place to weather the larger crises of resource depletion and ecological unsustainability that are approaching, and which will dwarf this current financial disaster.
Thanks Constantin for the article. i enjoy reading your Blog for its "real life" take on the crisis. Its always a joy to see the "wood from the trees" My thinking on the whole "Special" case for Ireland is probably linked to our entry back into the bond Markets in 2013. If there is no indication of a deal on our debt before we go back to the markets then its likely we wont sell any bonds and end up in another bailout program (presently our debt is unsustainable). Im thinking no one wants this, it prob ties in with the whole nonsense of having Enda Kennys face on Time magazine. The sad thing is a quick look at the figures would bring the whole house of cards down....But expect more "Healthy Irish Economy" advertising over teh yearand next
Thanks Constantin for the article. i enjoy reading your Blog for its "real life" take on the crisis. Its always a joy to see the "wood from the trees" My thinking on the whole "Special" case for Ireland is probably linked to our entry back into the bond Markets in 2013. If there is no indication of a deal on our debt before we go back to the markets then its likely we wont sell any bonds and end up in another bailout program (presently our debt is unsustainable). Im thinking no one wants this, it prob ties in with the whole nonsense of having Enda Kennys face on Time magazine. The sad thing is a quick look at the figures would bring the whole house of cards down....But expect more "Healthy Irish Economy" advertising over teh yearand next
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