Public pay, pension bill has risen €16bn since 2003
WHILE tax revenues are back at the level of seven years ago, the public sector pay and pensions bill has risen by €16bn in the meantime and this is where attention should focus, 'Finance' magazine says in its latest issue.
"Imagine the impact on the bond markets if Brian Lenihan announced a target to roll back the pay and pensions bill to 2003 levels, over a two- (or, at the very most, three-year period).
"This, of course, would involve a repudiation of the infamous Croke Park deal," the magazine says.
It criticises those -- including the 'Financial Times' -- who have called on the Irish Government to default on bank debts.
"A default on these bonds is a default on the Republic of Ireland as a sovereign entity -- to do so would represent an end of the record of credit worthiness of an Irish Government unbroken since the foundation of the country, when Brian Lenihan's predecessor, Michael Collins, and Eamon de Valera financed the nascent state in 1919," the magazine says in an editorial comment. The editorial continues: "Another worrying aspect is the widespread, almost casual, acceptance of the consequences of this course of action amongst more than a few journalistic commentators, and the fact that the costs of default can be so blithely dismissed.
"The main sovereign risk problem lies, in any case, not with the cost of recapitalising the domestic banking system, it lies in the failure to reduce Irish public expenditure to the levels that the economy can afford, and to levels which the international bond markets are comfortable with."