Saturday 29 October 2016

No, Mr Noonan, our debt is not sustainable

Published 09/07/2015 | 02:30

'By 'sustainable', the Finance Minister presumably means the debt is manageable and the country can afford the repayments this year'
'By 'sustainable', the Finance Minister presumably means the debt is manageable and the country can afford the repayments this year'

Michael Noonan says "our debt now is entirely sustainable" when he's asked if the Coalition will lobby for debt relief during the talks on Greece's future in the euro.

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By "sustainable", the Finance Minister presumably means the debt is manageable and the country can afford the repayments this year.

Tell that to the patient waiting on the hospital trolley, the single parent looking at a cut to their allowance or the shopkeeper hoping for a pick-up in their business, because many of these ordinary people will argue their position is not sustainable.

Anybody with a debt, be it a home mortgage or a small Credit Union loan, would avail of an opportunity to reduce the amount owed - but not our Government.

The Greek talks present such an opportunity. Yet the Fine Gael-Labour Party position appears to be against benefiting from any new debt moves in the EU.

Taoiseach Enda Kenny wouldn't support debt relief a fortnight ago, Agriculture Minister Simon Coveney insists Ireland will not seek further debt relief even if Greece gets an improved package in a new bailout deal. Mr Noonan says the debt is sustainable.

At the end of June, the national debt was estimated at €182.82bn. Negotiations with the Troika have reduced the annual repayments, through extensions and deferrals.

Under the Maastricht Treaty criteria, the debt to GDP ratio should not be higher than 60pc. The National Treasury Management Agency says the equivalent figure for Ireland in 2015 is 105pc.

Although few EU countries play by Maastricht rules, the figure still illustrates the massive scale of Ireland's debt burden.

Former Taoiseach Brian Cowen told the Banking Inquiry yesterday the country was bounced into entering a bailout.

Mr Cowen described a letter at the time from then European Central Bank President Jean-Claude Trichet as "threatening withdrawal of ECB funds in the absence of a formal bailout request".

In such circumstances, it is only reasonable that Ireland would continue to make an argument for debt relief.

A wake-up call in a competitive world

Economies do not turn on a single fulcrum, but no one can doubt that our 12.5pc Corporation Tax was pivotal to securing the foreign investment which shielded us - to some extent - during the crash. It certainly has been vital to the recovery

But the aftershock of the economic collapse has jolted other governments into responding, and yesterday British Chancellor George Osborne pledged to peg the British rate to 18pc by 2020.

By doing so, he signalled a declaration of "game on". Ireland has been greatly successful in luring tech firms and other global business leaders here. It is incumbent on the Government to be as competitive and creative as possible in maintaining an edge.

Brussels has already had us in its sights in attempting to increase the heat on our rate.

Our world is becoming a smaller place, and therefore cut-throat competition is perhaps the only certainty, so complacency could be very costly.

Taking what we have for granted would be extremely unwise. We were first out of the blocks before and will have to adapt to new market realities now.

Irish Independent

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