Ireland’s €205bn debt: So just who is to blame?
After the financial crash many people accuse the banks, but they are only part of the story
At the height of the financial crisis in 2009 the State was spending €23bn more each year than it was taking in by way of taxes and other income
There’s a perception that the €205 billion debt pile that sits on top of the Irish economy was put there by rogue bankers; in other words that it was the cost of bailing out the banks that left us with this legacy debt.
In reality just over €100 billion of it relates to a sequence of budget deficits run up in the wake of the crash and directly linked to then government’s mismanagement of the public purse. The then Fianna Fáil-led administration had spent lavishly, and had used windfall tax revenues from the property sector to plug the hole in its accounts.
When these taxes dried up, the budget deficit ballooned. At the height of the crisis in 2009 the deficit was €23 billion. That means the State was spending €23 billion more each year than it was taking in by way of taxes and other income.
This necessitated borrowing on a grand scale, which went on, to varying degrees, for most of the next decade until we finally ran a small surplus last year.
The bank bailout accounted for €60 billion. It’s a big number no doubt, but significantly less than the amount attributable to budgetary overruns. And we’re likely to get half the bank bailout money back – apart from the €30 billion sunk into Anglo and Irish Nationwide which will never be retrieved.
With this in mind, the Irish Fiscal Advisory Council’s criticism of the Government for repeatedly failing to prevent unbudgeted spending and over its use of potentially unstable corporate tax receipts to bridge the gap is more than just nitpicking.
Council chairman Seamus Coffey rightly claims there are “worrying echoes” of the 2000s when a cyclical expansion in tax revenues funded a significant increase in public spending.
National Treasury Management Agency boss Conor O’Kelly noted this week that the State’s debt – at €205 billion – was four times higher than before the crash, and that a whopping €60 billion has been paid in interest over the past decade.
We might have recovered from the crash in terms of employment; the national debt, however, is a more lasting scar.