Sign In. Don't have an account? Forgot Password? Not an Irish Times subscriber? Update Payment Details Not Now. In the early s, no such cushion was available and the State found itself at the mercy of the markets for much of the decade. When the incoming government took office in and indicated that it would deal with the legacy of the fiscal crisis, it was then able to use the cash held abroad to avoid borrowing for a significant period.
This helped ease some of the effects of the expenditure cuts on the economy. Throughout most of the s, the government met a substantial proportion of its funding needs by borrowing at home in Irish pounds. While this avoided any exchange risk on the borrowing, it came at a price. Over the s, the interest rate on borrowing in Irish pounds was much higher than if the government had borrowed in dollars or deutschmarks. Even allowing for the depreciation of the exchange rate over the period, borrowing in Irish pounds cost three to four percentage points more than if the borrowing had been in either of those foreign currencies.
This added very substantially to the interest bill on the inflated national debt that was the legacy of the s crisis. A major contrast between the aftermath of the s and the aftermath of the crash is that lower interest rates today make financing the resultant debt much more manageable. In , interest payments accounted for 8 per cent of national income whereas today, with an even higher debt burden, they account for only 3 per cent of national income.
The legacy of high-interest debt meant that, in the early s, even as some growth resumed, the government had limited resources available to improve public services. This time round, the very low interest rate on long-term borrowing has certainly benefited indebted governments, such as our own. It has also provided a much more favourable environment for private investors. While the low long-term interest rates last, the NTMA is refinancing the debt at long maturities.
This should mean that, unless we undertake a new borrowing spree, the interest burden on the high national debt will not be a serious constraint in the coming years. This has been a lackluster year for European Union economies.
Amid rising oil prices, uncertainty tied to Brexit, the China-US trade war, and brewing economic crises in Turkey and Italy, the European Commission revised growth forecasts down pdf after very short economic recovery. Meanwhile, domestic protest movements in countries like France, Poland, or Hungary have cast a gloomy shadow. The Republic of Ireland is an unlikely pick for EU economic and political maverick of A nation of fewer than 5 million inhabitants , it was one of the hardest hit by the global financial crisis.
But the country has managed to grow its economy at rates well above the EU average and this year went through several landmark cultural transformations that brought it closer to its European neighbors. So, how did Ireland do it? But Ireland relied heavily on a property bubble pdf that burst spectacularly after , becoming the first euro-zone country to fall into a recession.
The unprecedented increase in public expenditure to combat the virus, coupled with the loss in revenue from the fall in economic activity, will lead to a significant government deficit in The financing of such large deficits will come into sharp focus in the months ahead and hard choices will have to be made.
Ongoing, coordinated, action by EU policymakers will be required to ensure national governments including Ireland have the fiscal space to deal with the virus and reboot their economies. You can view the briefing in full below. For other videos, please visit our Youtube page.
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