Finally, Ireland exit the bailout and they might even stop eating pigeons


In the years between 2015 and 2020 we are supposed to start running budget surpluses, enabling us to begin paying back the mountain of money that we owe.

The size of our national debt is enormous, now over €200 billion, including the 67.5 billion euro bailout money.  Our debt to GDP ratio is around 125 percent which is on the borderline of what the financial markets regard as unsustainable.  Any slippage in our austerity drive and the markets will pull the plug on us again. 

Interest payments on our national debt are now running at around €10 billion a year and that is a crippling drag on our economy as money is sucked out of the country, money that otherwise could be spent on state services and job creation.

In a few weeks around €7 billion euro in bonds are maturing and the investors will have to be paid. 
Since we are back in the financial markets we can roll over debts like this into new bonds. 

But that €7 billion is just one of a succession of bond lots that will be maturing in the future; it shows what we are facing in the years to come.  Between interest payments on the debt and repayments on maturing bonds we are trussed up like a Christmas turkey, even if we are out of the Troika bailout.

We got into this mess, you will remember, because we were spending far too much during the boom years and when revenue collapsed as the bubble burst we were caught.  As Kenny said in his speech, "Everyone knows that you can’t keep spending more than you are earning."

Complimenting the Irish people on staying the course, he said that we have already completed over 90 percent of the necessary cuts and tax increases.  That is true, but the last 10 percent will be the most difficult. 

Kenny is optimistic.  As a result of the progress we have made, he said, we can now begin to reduce the national debt burden.

By 2020, he said, with continued effective management of the public finances, "we can eliminate government borrowing and cut public debt by a quarter, relative to the size of the economy."

That sounds great.  But the key phrase here is "relative to the size of the economy." 

Built into the government forecast are projections for growth of at least two percent a year, and you have to be as optimistic as Kenny to believe we will achieve that consistently. 

The forecasts right now are good, but it's really out of our control since it depends so much on a significant recovery in our export markets. 

There is also our ability to control spending.  Next year we are supposed to be taking a further €2.5 billion out of the budget, close to €1 billion of which is supposed to be cut from health spending. 

Given that the Department of Health seems incapable of enforcing cuts (instead of the planned cuts this year there was a spending over-run of over €200 million) that seems like pie in the sky. 

Where that will leave the deficit next year is anyone's guess.  And if you add in a failure to grow the economy we could be in trouble again.

The bottom line on our bailout exit is that it is a precarious business which, even if we stay afloat, will leave very little over to revive the economy here, thanks to the huge burden of debt we now carry.  We could be looking at a lost decade, or longer.

We have got this far thanks to the squeezed middle class in the private sector here who have been bled dry by tax hikes and hit by cuts in or charges for 'free' state services.  They have also seen their incomes stand still or go down at a time when everything seems to be as expensive as ever.

And as you know, tens of thousands of them are struggling and failing to pay mortgages on properties they bought during the boom and which are now worth half what the homes cost. 

You are familiar with the stories from here about all the ordinary couples who work hard and find that at the end of each month they have nothing left over when all the bills are paid.  And on top of this most people in the private sector here have seen their pensions vanish with the market collapse.

In contrast with this there is a large section of the Irish economy -- professional people and people on the state payroll -- who have escaped much of the squeeze that has hit people in the private sector. Their pay is largely intact and their pensions are protected. 

Our politicians, judges, civil servants and so on are all part of this elite.  Our saintly president, for example, who never misses a chance to deliver a sanctimonious lecture, is in line for four pensions.

That's another legacy of the bailout, a deep feeling here that the pain has not been applied equally. 
And that is why the radio stations here that did street interviews with people in the past few weeks found very mixed feelings about the Troika departure. 

A lot of people feel that it was the Troika which was pushing for cuts in wasteful state spending, often on pay and pensions, and demanding that professional fees from lawyers, doctors and others be cut so that they are more in line with European norms.