Tuesday 28 March 2017

Colm McCarthy: ECB, IMF square up over Irish debt hopes

A battle of wills could determine whether Ireland's repayment burden is eased, writes Colm McCarthy

PART OF THE TROIKA: European Central Bank president Mario Draghi, left, talks with EU Monetary Affairs Commissioner Olli Rehn at a European Union
finance ministers meeting
PART OF THE TROIKA: European Central Bank president Mario Draghi, left, talks with EU Monetary Affairs Commissioner Olli Rehn at a European Union finance ministers meeting
Colm McCarthy

Colm McCarthy

THE International Monetary Fund, in its report on Ireland released last Friday week, predicted that Ireland's debt ratio, at the end of 2013, would hit about 118 per cent of GDP, provided that deficit reduction targets are met and that economic recovery has started.

They expect GDP growth at two per cent in 2013 and about three per cent thereafter. Ireland is due to exit the official support programmes at the end of 2013 and will be able to borrow in the markets, whatever is needed to finance maturing debts and any ongoing deficits, from that point onwards.

This benign scenario is founded on a series of assumptions. The first is achievement of the deficit reduction targets, which requires more spending cuts and more tax increases, for at least two further Budgets. The second is a resumption of economic expansion. Implicitly, a third is the assumption that sovereign debt markets will look kindly again on lending to highly indebted eurozone countries. Finally, no allowance is made for extra liabilities, in addition to those already provided for, that could crystallise on the State's balance sheet over the next few years; the State has contingent liabilities for banks and for Nama.

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