National debt audit results are 'truly frightening', says researcher

IT’S AN idea borrowed from developing countries with long histories of debt burdens and visits from the IMF. But now Ireland has undergone its first “audit” of national debt – the results of which are “truly frightening”, according to its lead researcher.

The Audit of Irish Debt report by a team from University of Limerick – commissioned by the non-governmental organisations Afri and the Debt and Development Coalition and trade union Unite – calculates a potential national debt of €371.1 billion.

This figure includes a “conservative” estimate of the State’s contingent liabilities – monies for which the State is on the hook in the event of a fresh collapse in the banking system.

The €371.1 billion breaks down into €91.8 billion in direct Government debt and €279.3 billion in bank debt backed by the State.

Dr Sheila Killian from the University of Limerick, who led the research, said the audit “seeks to quantify and explain Ireland’s sovereign debt, both real and contingent, for which the Irish people have become responsible”.

The report concludes that the “constructive ambiguity” of the European Central Bank’s policy on bank bailouts is “certainly not a concept consistent with transparency”.

It also addresses what Dr Killian described as “quite intricate layers of anonymity” in relation to bondholders.

“Anonymous is kind of a key word in this report,” Dr Killian said. The long-standing anonymity of bondholders “has some justification” in normal circumstances, however, in times when bondholders have influence on policy, it is “frankly weird”, she said.

The €279.3 billion in bank debt includes €111 billion in guaranteed deposits and bonds under the Eligible Liabilities Guarantee Scheme, as well as €74 billion under the Deposit Guarantee Scheme.

It also includes the €30.9 billion in promissory notes issued to Anglo Irish Bank, Irish Nationwide and the EBS; outstanding Nama bonds with a nominal value of almost €29 billion; and a €34.6 billion net increase in the national debt due to emergency liquidity assistance provided by the Central Bank. The figures contain the caveat that a large part of the €91.8 billion raised by the Government was due to the banking crisis.

Jimmy Kelly, regional secretary at Unite, said the audit revealed an “unedifying picture” and uncovered “the shady complexity” behind the ownership of Irish debt.

Explaining the genesis of the audit, Neasa Ní Chasaide from the Debt and Development Coalition Ireland said audits were “a crucial citizens’ tool” that had been used in campaigns against unjust debts in developing countries.

“We were struck and shocked by the mirroring conversations being held in Ireland,” she said of the decision to commission an Irish audit.