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Ireland’s public debt per person ‘one of the highest in the world’, says new Dept of Finance report 

Ireland’s public debt is ‘one of the highest in the world’, according to a new report released by the Department of Finance. The Annual Report on Public Debt in Ireland 2021, released by Finance Minister Paschal Donohoe, revealed that the public debt increased by €33 billion during the two years of the Covid-19 pandemic and is now close to a quarter of a trillion euros.

At the end of 2021, Ireland’s national debt stood at a staggering €237 billion euros. 

This is an estimated 106 per cent of the national income, or equates to €47,233 for every person in the country. Ireland’s debt is described in the report as “one of the highest in the world.”

The report, published on Tuesday, also stated that, notwithstanding the increase in public indebtedness, the debt service burden has fallen, reflecting the decline in borrowing costs in Ireland. It adds that further debt accumulation would “increase fiscal vulnerability”. Further, it acknowledged that “major fiscal challenges lie ahead,” including a likely fall in corporation tax receipts, an ageing population with very large fiscal costs and the need to finance the transition to ‘net neutral’. 

“Such challenges highlight the importance of rebuilding our fiscal buffers in the years ahead,” the report added. The aim of the fifth Annual Report on Ireland’s Public Debt is to “shed light on key trends in Irish public debt,” the Department of Finance said

The report states that “…failure to raise the retirement age -and to better align it with increases in life-expectancy- would involve a serious intergenerational inequality…”.

Minister for Finance Paschal Donohoe said a decision on the future qualifying age for the state pension is still expected to be announced at the end of March

Minister Donohoe, speaking at the launch of the fifth Annual Report on Public Debt in Ireland 2021, said he believes the public finances “can absorb the recent level shift in public borrowing.” 

Taking to Twitter, Minister Donohoe said that the analysis highlighted the “significant impact” of the pandemic on Ireland’s public finances. However, Minister Donohoe insisted that the Government responded “swiftly and forcefully to minimise the fall-out from the pandemic,” adding that this was the “appropriate strategy”.

 

“The economic supports that we put in place saved jobs, supported households and kept businesses afloat the length and breadth of our country.

“As the economic recovery gains traction, it will be necessary to slow down, and subsequently stop, adding to our public debt,” he added.

Speaking on the need to “protect against the challenges” which are inevitable, Minister Donohoe Tweeted: “We need to steer the public finances to a more balanced path. We can do this while continuing to make significant capital investment, under the National Development Plan. 

“This will help lay the foundations for future growth while protecting against the challenges that lay ahead.”

PANDEMIC SPENDING FOUR TIMES’ THE EU AVERAGE

The report reveals that Ireland’s expenditure on pandemic-related supports was approximately four times’ the EU average as a percentage of national income.

The report shows how Ireland’s national debt rose from 95% of GNI* just prior the pandemic to 106% of GNI* at the end of last year. The analysis also breaks down how approximately 

 €30 billion was spent on Government supports during the crisis induced by Covid-19.

Broken down, €4.5 billion was spent in health, €2.6 billion in business supports, €9.8 billion in income support and €9.1 billion in labour market supports. Meanwhile, €4 billion of the total bill is defined as ‘other’ spending.

On Tuesday night, the Dáil heard that the wage subsidy schemes during the pandemic cost the State over €10 billion.

The Minister for Finance said that the Temporary Wage Subsidy Scheme and Employment Wage Subsidy Scheme cost €10.26 billion and protected the jobs of 690,000 people.

 Taking Priority Questions, Paschal Donohoe told Aontú leader Peadar Tóibín that there is “the possibility next year that our [national] debt as a percentage of national income will be back to where we were before the pandemic”.

However, as the economy continued to grow strongly over the past two years, debt as a percentage of GNI* rose by 12% compared to a euro area average of 15%, the Minister said.

The national debt, measured either as a percentage of national income or on a per capita basis, peaked in 2021 and is projected to fall from 2022 onwards.

When asked about possible sanctions against Russia at the launch of the report, the Minister said that this will be discussed at the Ecofin and Eurogroup meeting in Paris on Friday.

He said he was receiving ‘feedback’ from Irish companies concerned about what form sanctions may take, but he said: “We have an obligation to respond back proportionately but the cause of this is the actions by Russia.”

The report also notes that the “sharper than anticipated pick-up in consumer price inflation” may accelerate moves by central banks to reduce their activities in the sovereign debt markets, meaning it will become expensive for countries – including Ireland – to borrow.

In April 2021, Tim Jackson, writing for Gript, said that the weight of Ireland’s lockdown debt will fall on our children, who will ‘pay dearly’ because of it. 

“There is surely a day of reckoning coming, when economic mistakes will meet debt-servicing demands, and it’s not going to be pretty,” Mr Jackson said, adding: “[…] The real-life consequences of unemployment and drastically reduced economic opportunities means younger people will pick up most of the tab for the current government’s policies.

In a piece published in October 2021, Gript’s John McGuirk called for fiscal restraint in view of Ireland’s poor finances, writing that: “The Government is on course to borrow about 20 billion 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.”

Mr McGuirk said it was “remarkable” how quickly Ireland, Irish politicians, and Irish voters, have forgotten the economic crash of 2008.

“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.”

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