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Seamus Coffey: Welfare and public service sectors will be the keys in a tough and daunting 2012

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Photo: Thinkstock

Photo: Thinkstock

Photo: Thinkstock

IRELAND is heading for a general government debt of around €200bn by 2014. One-quarter of this is as a result of bailing out the banks. One-half is due to the need to borrowing beginning in 2008 to fund government expenditure on social welfare, public sector pay and other goods and services, while we brought the final quarter of this debt with us into the crisis. This debt was largely the overhang from the last fiscal crisis in the 1980s. The debt was never repaid but its significance was reduced by growth and inflation.

This is a huge debt level but one that is on the border of sustainability. It is likely that a debt of €200bn can be carried from 2014 but it will be difficult. Just like the debt from the 1980s we have little ambition to actually pay this off. The aim is to service the debt by paying the interest and hope that, in time, growth and inflation will reduce the burden of doing so.


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