It’s quite hard to visualise, or comprehend, just how much money a quarter of a trillion euros is. To put it into some context, the United States currently operates eleven Nuclear Powered Aircraft Carriers – the largest, most expensive, and most powerful naval vessels ever built. Ireland’s national debt – the amount of money the country owes – would be enough to pay for twice that many. There was much political debate around the National Broadband Plan – €3billion over 25 years. The national debt would allow us to fund eighty three national broadband plans. And over 100 national children’s hospitals.
If you set out to pay off Ireland’s national debt – excluding the interest – it would cost you €100 every single second, €6,000 every single minute, of every single day, for the next 80 years. In short, it is an astonishing amount of money.
All of this is fine, of course, while interest rates remain low. Left leaning economists will point out that the cost of servicing the national debt is relatively low, and some will go so far as to argue that borrowing at interest rates below 1% amounts, in essence, to free money, which the Government should use to invest in infrastructure and projects to improve the lives of Irish people. Like, for example, housing.
The problem will come when interest rates rise. Ireland has a massive pile of debt. The people who lent us that money are entitled to receive interest on it, and to have their debts repaid when they fall due. Traditionally, governments just repay old loans with new ones – you repay a billion euros by borrowing a billion more. This is called “rolling over” the debt.
But of course, eventually Ireland is going to be in a position where the portions of the national debt on which we pay low interest rates falls due for repayment, and the government will have to borrow at higher interest rates to repay it. It is not hard to imagine a situation where Ireland ends up paying ten or twenty billion euros annually just on debt interest.
Despite this, the Government is on course to borrow about 20billion more than it receives in taxes this year alone. Some of that, of course, is due to extra current spending brought about by Covid. But as Covid wanes, the obvious and prudent thing for politicians to do would be to try to bring the national budget back into balance as quickly as possible. The problem is that there are no plans to do so, and no appetite to do so.
It is notable, as we approach budget week, that the opposition is actually more keen on additional spending than the Government is. The airwaves will be full, over the next week, with calls for additional spending on this, or that. Nobody – at least, nobody in elected office – is calling for financial restraint.
And we know why.
There are no votes in it. The electorate does not want – and, in Ireland, has never wanted – fiscal restraint. A politician who went on the airwaves to say that they would reign in spending, instead of “investing in public services” would be cast as a villain, or villainess. They would be accused of “Thatcherism”.
The problem is that Ireland, at fairly regular intervals, by international standards, experiences catastrophic economic contractions. One reason should sound familiar, to anybody who lived through the period from 2000-2012: Everybody calls for more spending, nobody listens to the naysayers, and then, eventually, when things go bad, we run out of money.
It is genuinely remarkable how quickly Ireland, and Irish politicians, and, most importantly, Irish voters, have forgotten what happened to the country in 2008.
In some political circles, it has become fashionable to blame it all on outsiders. The Germans and the Bankers. The Troika. The global crash. But the truth is and ever will be that much of that collapse was our own fault, because we did not manage our own national finances.
All of this makes it even more remarkable that just 13 years later, we’re back demanding more and more spending, even as the debt ratchets up to almost unimaginable proportions.
It will not end well. And, when it does not end well, every politician presently calling for higher spending will claim that they saw it coming. And most voters will deny any responsibility for it.
We are, in Ireland, our own worst enemies. And ever have been.