On The Myth Of Ireland's Debt Sustainability

Tyler Durden's picture

Ireland is continually held up as the poster-child for austerity-driven 'aid' and how the European Union can successfully manage an economy through a depression with no real pain for bankers. Unfortunately, as we have pointed out previously, judging a nation's progress on the back of its bond yields (when liquidity is negligible and the mighty hand of ECB-collateral-reacharound is upon us) should become anathema from any serious analysis. The sad truth, specific to Ireland in this case, is the relative size and importance of EU subsidies (and the EU budgetary allocation) mean that assumptions of current account surplus going forward (the much-needed elixir to sustain the gross debt load the nation's taxpayers now are buried under thanks to banker-transfers) leave Ireland's debt sustainability greatly in question.


Authored by Dr. Constantin Gurdgiev, originally posted at True Economics blog,

There's been some debate recently as to the size and importance of EU subsidies to Ireland and the EU budgetary allocation in the context of Irish economic growth. Here are the facts.


First up, the summary of EU subsidies, contributions and net subsidies:



Next, using the IMF WEO database, the netting of the EU Net Receipts out of of our GDP and GDP per capita:




Factoring in the net receipts into growth equation:



The above clearly shows that lower volatility in receipts has contributed to smoothing of the GDP growth rates in most periods, but exacerbated 1991 and 2001-2002 slowdowns. EU net receipts also helped fuel (not significantly, though) 2004-2006 bubble and failed to provide any support for the economy in 2008-2010 collapse.


The reason for small effect of supports in recent years is very clear from the charts below:



However, the most dramatic effect the subsidies had was registered on the side of our external balance.


Recall that international 'experts' love the idea of Irish Current Account surpluses as the driver for sustainability of our debt. Herein, however, rests the problem:


The logic of 'experts' arguments is that Ireland can sustain current levels of Government debt because we have potential to generate current account surpluses vis-a-vis the rest of the world. And their evidence of that rests on their reading of past (1991-1999) current account positions.


Alas, once we net out net transfers from EU from these... the picture changes.


In the entire pre-2010 history, Ireland generated current account surplus (net of EU subsidies) in only one year, namely 1996. When one realises that debt sustainability for Ireland requires current account surpluses to be in excess of 3% on average over the next 10-15 years, one has to be slightly concerned by the prospect (as 2014-on suggests under the current EU Budget proposals) that Ireland will no longer be a net recipient of EU subsidies.


Here's what happens were Ireland to become net contributor to the EU budget in 2014-on at a rate of 1/2 of 2009-2011 annual subsidy received. Our average annual CA surplus (per IMF projections for 2013-2017) should run at 3.585% of GDP, but factoring in EU potential budgetary changes it is likely to run at 2.825% of GDP. And since the path of the CA surpluses is expected to decline (as IMF projects) in 2016-2017, then it is unlikely that the CA surpluses will be in excess of 3% over the period through 2022.

So what about that 'sustainability' of Irish debt levels, then?


UPDATE: And extended for those who initially questioned the analysis and were looking for more depth - the following is hard to question (and tough to swallow the assumptions that 'save' Ireland)

(via True Economics): Irish Current Account And Government Debt

In the previous post I highlighted the problem presented by the EU Budget changes in the near future to the sustainability of Irish debt dynamics. I referenced expert opinions on the role of current account surpluses in determining these dynamics. here is an example from early 2011 (emphasis is mine):


"... this dependency [2010 bailout] of Ireland on foreign support is difficult to understand given that the country has not lived continuously above its means in the past.  Ireland has run a current account deficit (which means the country uses more resources than it produces) only for a few years; and if one totals the current account balances over the last 25 years, one arrives at a foreign debt of about €30 billion.


This should not be too difficult to finance given that it represents only about 20% of the country’s GDP of €150 billion. Moreover, Ireland is on track to run a current surplus this year and should thus not have any need for additional foreign funds."


Here's a problem - the above, as I noted in the previous post is based on some rather unpleasantly non-sustainable assumptions. Here's the arithmetic, based on IMF WEO data.



As chart above shows, Irish cumulated current account balances for the period 1980-2009 totalled -€39 billion, that's where the 'about €30 billion' miracle figure coming from. Alas, over the same period of time, Ireland received €39.4 billion worth of net transfers from the EU, which counted as a positive addition to the current account. Netting these out, Irish real 'external balance' cumulative for 1980-2009 was -€78.4 billion. Worse than that, net of EU subsidies, Ireland have run external deficits in every decade from 1980 through 2009. In other words, using the expert turn of phrase, Ireland used more resources than it produced in every decade through 2009.
Now, was it true that Ireland 'has run a current account deficit only for a few years'? Why, here's a chart plotting Ireland's current account balances:
Gross of EU transfers, Ireland run current account deficits in 1980-1986, 1989-1990, and 2000-2009, which means that it run deficits over 19 out of 30 years between 1980 and 2009, which is more than 63% of the time. Ireland run current account deficits almost 58% of the time in the period of 1980-2012. Hardly 'a few years'. More importantly, removing EU net subsidies, Ireland has managed to run current account deficits every year between 1980 and 2012 except in 1996 and 2010-2012. That means that Ireland was using more resources than it produced in 29 out of 33 years since 1980, or 88% of the time.
For the last bit, let us recall that back in the 1990s (the period of Ireland's rapid recovery from debt overhang of the 1980s) Irish current account surpluses relative to General Government Debt stood at 26.8% (using 1999 level of General Government Debt and the cumulated current account surpluses, inclusive of EU transfers throughout the decade of 1990-1999). For the period of 2010-2017, the IMF projections imply the same ratio of less than 17.5%.
Let's take a closer look at these comparatives. Irish debt peaked (for 1980-1999 period) in 1987 at 109.24% of GDP and was deflated on foot of a current account surpluses cumulated at 26.8% ratio to 1999 debt trough. For the period of 2000-2017, the debt will peak at 119.31% of GDP in 2013 and is expected to deflate at a maximum surplus rate of 17.5% (all based on IMF projections) before we allow for EU budgetary reductions for 2014-2022 period (which can bring this number closer to 14%).
Again, one has to wonder if the argument that current account surpluses can really be viewed as a serious enough potential source for wrestling Ireland out of the debt trap. And that is before we start worrying about the potential drivers for these surpluses, such as:
  • The 1990s exports boom driven by a combination of very robust US and UK growth expansions during the 1990s;
  • The 1990s convergence race for Ireland to catch up with the EU capital and income levels - something that is now firmly exhausted as the potential for growth; and
  • Significant net transfers from the EU during the 1987-1999 period that totalled some €12.6 billion which in 2014-2022 are likely to turn into net contributions to the EU from Ireland.

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Yen Cross's picture

 Ireland should have never joined the "European Union". The Irish pound was correlated to sterling until 2002.

  I'll trade the crazy cable, over the ponzi euro any day.



homonohumanus's picture

There should never have been something as Europe to begin with. No supra national bull crap, people have already no significant control of the people they are electing at the national level...

Kitler's picture

Irish foreign debt per capita is 390,000 euros and over 1000% of GDP. Click on the "Ireland" part of the pie chart.


Why wait until interest rates hit 10%... may as well just tow that country into the middle of the Atlantic ocean and sink it while there is still room.

Kitler's picture

No... thank the bankers.

economics9698's picture

Thats just fucked up dude.

knukles's picture

Aye, shades of shamrocks and shillelaghs, the Blarney Stone and baloney, bangers and buttocks, it's all be a greenin' an like the Laddie's Rainbows amongst the Orange Order marchers camped on a hillside by Drumcree Church a be seekin' a defy the government ban on their parade along the Garvaghy Road,by the Catholic Church, aye but the fun o' it all....
Cannot say anything other than Bye Gosh and Be Golly, what with the Sustainability of the Debt, lads, why it be Green all the way boys, like risin' above the Bloody Brits an' their likes, drivin' them from the Emerald Isle, sustainin' our cause.
Garnerin' the support of the Be Jesus tree huggin' types, the Birkenstockers and supportin' the grand Olde Foes.
Our Debt Shall Grow in Our Hearts and Minds Forever.
An' always a payin' off on the Central Banks Rollover Facility.
As sustainable as the Lads themselves.  Awaiting the next auction of the short Leprechauns, Intermediate Faeries, Long Banshees, Inflation Adjusted Changelings and lastly, the Pooka Putables.
All denominated in the Chocolate Covered Shamrocks, by the Grace of God and Murphy's Makin's.

TahoeBilly2012's picture

No shit...just a couple years after I even learned about the whole Irish independence thingy with the guy on the whiskey bottle, nopw here they are back enslaved like never before. Where is the IRA on this crap?

Bicycle Repairman's picture

This myth exists because the Irish have donned the horse collar without complaint.

Marco's picture

The 1000% is private debt, so in theory it can be defaulted upon with normal bankruptcy proceedings, also it's partly collateralized unlike government debt.

Radical Marijuana's picture

Well, homonohumanus, you are wishing for retroactive political miracles!

I repeat the obvious points regarding why the Bilderbergers worked behind the scenes to get the EU going:

Professor and historian, Carroll Quigley, in his 1975 book, Tragedy And Hope:

"The powers of financial capitalism had (a) far reaching (plan), nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the system was to be the Bank For International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank ... sought to dominate its government by its ability to control treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the Country, and to influence cooperative politicians by subsequent economic rewards in the business world."

Ireland is getting screwed over, the same as the whole world, by the runaway triumph of a privatized fiat money-as-debt system, which has no apparent ways to be effectively resisted. The only thing we can actually do is watch and wait, as too much "success" by that system eventually destroys itself. (Thereafter, we might be able to survive through that, to see what the next installment of social insanities have in store for us.)


Attempts to use Irish courts against banksters:


The Irish Sue the Banks

On October 15th over 100 cases were filed in the High Court in Dublin suing various mortgage providers. The Irish People have initiated a process of suing the banks en-masse. They believe the bankers have broken the law by their practices, resulting in widespread ruin in Ireland as businesses close, mortgagors default, families are evicted from their homes, our young people are forced to emigrate and tragically, many people turn to suicide. This situation has been caused by the banks, and we will take them to task through the courts to put right their wrongs.

The Irish people generally are also taking to tax protesting, by delaying the payment of their taxes. The Irish people have a fairly fresh memory, as a people, of being colonized and screwed over by those colonizers. Their current situation is merely more subtle, since it works through the abstract monetary systems' frauds.


Of course, the entire European Union project was a stealth attack, which depended on mostly sneaking things through, while misinforming most people, and attempting to make sure that they did not get a vote, and certainly never got an informed vote. The Irish entanglement in the EU history was a good example of that process, resulting in Ireland gradually getting more and more screwed into place, as a debt slavery society, inherently heading towards more runaway debt insanity, as is the rest of the world!


The Turning Point - Full Film

... Bilderberg conference info ... Recently, they lost some of their previous total control over dissemination of information, due to the rise of independent media sources & internet-based journalists. They intend to correct this problem and discussed it, at their annual May 31 - June 3, 2012, conference ... It is reasonable to expect that the Internet Freedoms will be shut down by more "treaties" like what created the EU. There are also reports those 'elites' have had some emergency meetings to discuss what to do about various protesting done by people in Europe.

The trillionaire mass murderers that are running the real world appear to me to only be superficially opposed by various reactionary revolutionaries, whose bogus "solutions" are mostly the same old impossible ideals, based on false fundamental dichotomies. For sure, relatively more people are waking up to more "truth" about how bad things really are, BUT THAT IS NOT REMOTELY CLOSE TO HAVING BETTER SOLUTIONS! The social space is dominated by lying elites, and reactionary revolutionaries' controlled oppositions. If enough people woke up ENOUGH, then the reactionary bullshit "solutions" would no longer be the dominant commentary about the evil elites as source of all the problems, and IF the public woke up to there being chronic political problems, which they had a responsibility to stop simply ignoring, while letting evil elites make all the decisions about their future, THEN I would think that the public was waking up enough ... However, so far, only a small minority are waking up about the magnitude of the realities regarding the small elites, and. almost nobody, only a Fringe Cubed, or a Fringe to the Fourth, are waking up to what realistically better solutions must be.

homonohumanus's picture

Good post :)


I know the agenda. I just wanted to point out in answer to somebody post that it is not only Ireland that should have not been enslaved into the Eurozone.


Democracy is local, I'm French, when I think about it I wish I could restore the Gaul... Tribes, organized locally around cities. Democracy is local. But that is a pipe dream.


Actually I find out arguing with people that most people are against democracy, it is a up hill battle to explain them the lacking of the elective and so called representative system. One of those day I will quote some of the thinkers "des lumieres" (18th century) on the matter. Back in time word were not bend, they knew what democracy meant and they made clear they did not want it. In a democracy, the most numerous have the power, whereas the representative system are representative not of number but classes (3 three mostly) and it is easy for the top class to rig the game.


ANyway it is pointless to speak about it, till the people don't get the reason why they are powerless in front of the abuse of the system. It is not plot but our powerless state is systemic, as we have no power and should revolt about voting. We are not citizen barely electors, the difference is sound.

Silver Bug's picture

Ireland is a ticking debt bomb. Just like so many other western societies.



RockyRacoon's picture

Been ticking for a long time it seems. Wish something would blow up already.  I'm outta breath.

Yen Cross's picture

 Public reciepts from net E/U budget peaked in 1991 (just above 6%). Based on Tylers chart, that figure was .4% in 2011.

  That pretty much sums up the European Union 'experiment'...

 If you want to really dig into geopolitical issues/ https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html

  Ireland page/

THE DORK OF CORK's picture


We left the sterling peg in 1979.

They created a mini -  depression in the early to mid 80s (after a agri euro fiscal boom bust which the banks created credit on the back of) so that we could join our Teutonic friends in holy matrimony.

They finally printed in 1986 and again in early 94 after the first mini me EMU crisis - both those events were caused by exactly the same thing.

CARS and the capital they burn through for no net return.

Yen Cross's picture

You officially became part of the euro currency in 2002. Yes you are technically correct. My appologies/

THE DORK OF CORK's picture

No problem Yen

Now after all those years of the wrong monetary envoirment the entire rational domestic supply chain has been outsourced leaving no rational internal commerce.

Cork city was jammed with cars this Friday busy exporting hard currency for no net return - meanwhile the pubs are empty.


Drinking was once a form of capital control in Ireland .........now not so much.


Yen Cross's picture

D/O/C if you don't mind me asking? What would you classify Irelands (primary export) as?

THE DORK OF CORK's picture

Chemicals & other shit , but much of it is lightly taxed. (although some of it is fictional  but not all)

We have probally the highest trade surplus per capita in the world.


All these weird trade inbalances really got going after the big bang in London during the early 80s.


Ireland had to game the system because it is really a non sov London back office.

We cannot sustain domestic commerce via printing.



Its why they (the banks) ran so much debt opium through this bog.

Irish people function as corporate conduits.

Yen Cross's picture

If Ireland is running a surplus, wouldn't it make sense to be "sovereign"?  Just be a E/U trading partner? 

 Have a "Central Bank" , with monetary policy, to preserve the value of your (resources/exports) and keep a lid on labor costs?

  Am I missing something? You are decades of wisdom ahead of me...  I appreciate your time.

THE DORK OF CORK's picture

These international companies use this country as a base of operations that can be sunk in a emergency ......

Our very ordinary domestic economy was wiped out by these international companies in the 70s and especially the 90s.


Now we have no rational domestic deomestic economy , not even a below par domestic economy.

It no longer exists.




Ireland is actually reducing its total debt quite a lot but this can only acheived when other people buy "our" shit as the debt cannot be destroyed via paydown as all money is debt.

i.e. other people outside the state get into debt to buy the goods and services.

This further destroys the remaining rump domestic economy as it is using the wrong unit of account - a international unit,


As I said we are a pure conduit for corporate operations.

Conduits can be burned when they no longer have a use.

I.e. unlike Iceland (fishing  , domestic energy etc) we now have no redundancy


Yen Cross's picture

  Ireland is lacking leaders. You should step up! A man with your " patina" is needed. 

  A man with common sense, that has been around the block "several times"...   A man that knows his mortality<>

   Thank You again for your time.

fleur de lis's picture

Why can Ireland not do what Iceland did and just cancel the debt and move on? Surely there is enough public support for such a move, and both countries share similarities. There are probably too many NWO-owned politicians trying to keep the current system but how long can they hang on? Does the Irish public really think this will work out well for them in the end?

Yen Cross's picture

 You have a valid point, economies of scale ( old school) ideas are hard to change...  When Ireland has a whale (bankster) harpoon shoved up it's ass, a new beginning can procede.

Iceland is a land of 300K residents on a geo-thermal rock/

RockyRacoon's picture

As Dork pointed out, there is no place for them to "move on" to.  Alternatives are lacking.

css1971's picture

Lots of corporate head offices in Ireland, there to funnel money through the lower taxation rates.

JamesBond's picture

The stadium was full (Ireland vs Argentina) and the Guinness
Was flowing last night.
I know - I was there.
Dublin has more life than you may think.


Peter Pan's picture


ebworthen's picture

The bankers wouldn't get fat salaries and bonuses, and the politicians work for the bankers.

Vegetius's picture

Well the Irish Government is working along the Micawber belief that "Something will turn up" but nothing will. The same old clientelism, same old lies that’s the order of the day in Dublin at the moment. Most of the PIIGs work on a system of the golden circle where the few always get the peaches on offer and the rest get the scraps from the table.

The pressure is on and fantasy rules in Government circles as they lick EU arse and hope that the Germans will give them 60 Billion euros give or take. What a farce, just like the rest of the PIIGs

"Anybody who has the courage to raise his eyes and look sanely at the awful human condition ... must realize finally that tiny periods of temporary release from intolerable suffering is the most that any individual has the right to expect."

Flann O'Brien

Marco's picture

Ireland is a huge exception ... their backstopping the massive bank debt is necessary for the rest of the EU financial system (including Germany's) to survive. Greece can be allowed to fail just as soon we have an European deposit guarantuee (and not at all before that, because it would set off a pan european bank run). Ireland can't be allowed to fail at all.

MeBizarro's picture

Nope because it takes down the UK financial system too which has ridiculous overexposure to Irish debts.

woggie's picture

the beast is on the gobble
and all that matters is we're all headed for it's belly

THE DORK OF CORK's picture

If you want to understand the post war Irish economy its best to look at private car regs

look at 1957 - Suez ?

The 70s car boom

The early /mid 80s bust

The massive post 1987 credit inflation (Single european act 1986)   (small break in the early 90s - first EMu crisis)





I am going to the pub now .............


Peter Pan's picture

Iceland v Ireland.
Do I need to say more?

css1971's picture

They just need to do an Iceland. Problem solved. EU and bankers be damned.

Radical Marijuana's picture

css1971 see many of the previous comments!

IF Ireland does an Iceland, then the possible domino effect probably wipes out the EU, and many big banks around the world. The same is true from many other sovereign debt insanity situations, where that country is big enough, and its debts entangled enough with the rest of the world's financial house of cards system. That is WHY central banks will just keep on making more money out of nothing, and lending that, to be paid back to other banks, so that the merry go around can keep going around, because the alternative is hush a, hush a, we all fall down! The established global system of electronic fiat money frauds, backed by atomic bombs, is NOT something that any of us can imagine finally collapsing. However, it is also something which nobody that I know can provide any rational explanation for how that kind of runaway debt insanity could be sustained indefinitely ...







Going Loco's picture

Statistics are interesting but then there's life. My cousin who lives in West Cork and just had unexpected urgent heart surgery reports that the facility he used is closing; that the ambulance service is shrinking rapidly; and that the local concensus is that if you get really ill in West Cork in the future you probably won't make it.

RockyRacoon's picture

Ten thousand reg'lar folk in the streets is equal to one fat-assed banker in a boardroom.  It'll take more than 10K to move the social needle.

Peterus's picture

Only thing they could get if their demand were granted, would be Greece-like scenario. I can't blame them for refusing banksters "remedy" it's only sensible thing to do, but if their main concern is lowered spending they are completely clueless. The way out of this is default and lower spending combined. When they won't be able to loan anymore there is no way to just keep piling up deficits. Out of debt trap and out of welfare state. Probably out of UE also...

With 42.0% govt spending to GDP it is now considered normal, but this is crazy level by any standard. Regardless of good exports, regardless of more socialized countries, for any country to get to really sustainable path - spending has to be curbed. Not to get somwhere to carve the pound of flesh, just becaues it's harmful and extremely heavy burden.

Yen Cross's picture

 If you are going to post (viral infected)) youtube videos... Book mark them first! Pull/copy, the link from your bookmarks, It will have a title/ so people like me can trust you!

 I trust ebworthen  . He can post ( DoJ algos) and I would open the file... 


Seasmoke's picture

Ireland vs. Iceland

Oh what a difference ONE LETTER makes !

q99x2's picture

Don't tell me Ireland too. I just read about Argentina and Greece. That's a lot of electrons with no where to go. TS(is)H(ing)TF and I"m buying silver. Fuck TZA. By the time settlement takes place shop will have closed up.

marginview's picture

this media seeking twit Constantin Gurdgiev was on Irish radio continually before the big crash lauding the efficiency of the banks at providing houses to young irish people who before this wonderous market creating demand meeting magic used to have to live with their parents. His hindsight bias is all the more annoying as he peddles himself as some kind of accurate forecaster now.

His 0 correlation to correctness forecasting ability is bad news for ZH and its gold parabolic wish. Nothing will happen to gold until Gurdgiev changes his view and sees it as something about to crash.