Colm McCarthy: This burden of bank debt is simply not sustainable
No other country in the eurozone has been subject to such threats from the ECB, writes Colm McCarthy
Ireland's ratio of debt to GDP is expected to hit about 120 per cent in a few years' time. Roughly one-third of the total will be due to bank-rescue costs.
If these were not a factor, the accumulated budget deficits -- the normal source of debt -- would total about 80 per cent of GDP, a common figure in the EU and a level that should be sustainable. It is the extra 40 per cent deriving from the rescue of bank creditors that has pushed the total into the red zone and destroyed the credit-worthiness of the Irish Exchequer. Even the huge Irish deficits of recent years have not been enough to destroy credit-worthiness on their own because the initial debt level when the crisis struck in 2008 was low.
Indeed, Ireland ran budget surpluses in every year but one since eurozone membership commenced in 1999 and was one of the few eurozone countries that stayed within both the deficit and debt limits of the Stability and Growth Pact in every year up to 2007.