Monday 23 October 2017

Ireland has a net worth of minus €77bn – Fiscal Advisory Council

THE liquidation of Irish Bank Resolution Corporation could lead to substantial financial gains for the State, according to a new report from the Fiscal Advisory Council.

However, the gain would simply be of highly increased government debt. In fact, Ireland has a new worth of minus €77bn, according to the council.

“We have suffered the fastest deterioration over the euro area in terms of net debt over the last five years,” said Dermot Smith of the FAC. “The Irish government’s financial liabilities have increased by a factor of 4.”

He said today’s report reflects a comprehensive look at the government’s balance sheet, examining its assets and its liabilities to see how it has evolved since the financial crash.

Large deficits and the costs of bailing out the banks have left Ireland with a net worth of minus €77bn.

It is now the third most indebted state in the euro area, only behind debt-ridden Greece and Italy, according to the figures.

Winding up IBRC would mean a reduced funding requirement of €1bn a year, due to the conversion of promissory notes into long-term Government bonds, said Mr Smith.

“Getting rid of the promissory notes and replacing them with these long term government bonds – that yield has already saved the state €7-8bn.”

The FAC has noted that further gains from the windup may be realised but will be harder to quantify, such as improved in investor sentiment toward Ireland.

“If we hit that €3.1bn savings mark, the markets will be more inclined to like us and we will be in a better financial position going forward,” said Mr Smith.

The €3.1bn savings that has been established as a target by the government will likely be achieved through tax increases and spending cuts. 

Mr Smith was nonetheless positive about the future of the financial state of Ireland. “The Irish deficit is coming down, the debt ratio is stabilising - there are lots of positives out there,” he said.

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