NTMA banks on influx of €3bn to post office savings schemes
AROUND €3bn is now expected to pour into post office savings schemes this year -- making a significant dent in the amount the country needs to borrow on financial markets.
An Post deposits and prize bond purchases go to the National Treasury Management Agency (NTMA), which borrows for the Government. A €3bn total would cover more than 15pc of this year's likely government deficit of €18bn.
The flood of money -- equivalent to almost €3,000 for every household -- is coming partly from people who are reluctant to leave their money in Irish banks, even though up to €100,000 is guaranteed by the same government that guarantees An Post savings.
But some of the funds probably represent a move away from shares -- and even more from property -- as a source for savings. The figures compare with inflows of just €450m in 2007.
Total NTMA borrowing this year came to around €25bn, including €4bn to replace debt due for repayment. This will include €3bn to provide capital for the banks under the 10-year 'promissory' scheme. The agency also has some €20bn in cash and has decided not to raise new borrowings for the rest of this year.
Officials think another €2bn plus could flow into post office schemes next year, when the NTMA will probably need to raise another €25bn to cover deficits and repayments. Its cash reserves put Ireland in a different position from Greece, which ran out of money when it was unable to borrow on the bond markets and had to be rescued by the EU and IMF.
The NTMA funds could cover government spending until the middle of next year, but the agency will not want to risk the Greek situation and is likely to test the market early in 2011.