The Ball Park Figures of the Irish Crisis

[C. Flower]

I'm sure that I'm not the only one trying to get my head around the ball park figures of the crisis in Ireland. Do these figures seem correct?
Is the gap caused more by undertaxing than overspending?

2010 Expenditure = 50 billion (Source: B. Cowen)

Bank bailout interest costs 1.5 billion per annum approx (Karl Whelan TV3)

Total 51.5 billion outgoing 2010

Revenue 2010 = 32 billion (According to B. Cowen - may be less)

Gap = 20 billion approx.

EU allows borrowings of max 3% of GDP by 2014

3% of GDP (target for max borrowing 2014) = 5 billion

Without growth, we would need to adjust by 15 billion per annum by 2014 if we were to meet EU requirements.

Gov. is proposing to cut up to 7 billion this year (4.25% of current GDP)

Karl Whelan (TV3, VB) is saying that we have to cut down to borrowings of 10% of GDP by next year (Q. is this part of an agreement with EU?)

(GDP = 164 billion - 2010 (CSO quarter 2) - but Whelan seems to be saying that GDP will be 150 billion.)

3% of GDP = 4,945 billion)

To the best of my recall, Youngdan has been giving us these figures for the last two years.


It was posted here today that some Companies are using a subsidiary relief to pay less that 3% tax in Ireland.

Socialjustice.ie says that we have amongst the lowest tax take per capita.

Do these figures include indirect taxation ?

Ireland’s total tax-take is far below the EU average according to statistics published June 28, 2010 by Eurostat, the EU’s statistical agency. This publication shows that across the EU the total tax-take averaged 39.3% of GDP in 2008. For Ireland the comparable figure is 29.3%. This raises two major questions for Ireland:

• Why the Irish government insisted in Budget 2010 that the total €4bn in adjustments had to be done by cuts in expenditure rather than making part of the adjustment by increasing the total tax-take as recommended by Social Justice Ireland.
• Why the Department of Finance continues to over-state Ireland’s total tax-take; the Department claims that Ireland’s total tax-take for 2008 was 30.8% of GDP while the correct figure is now seen to be 29.3%. These new EU statistics vindicate Social Justice Ireland which has consistently maintained that the Department has over-stated the total tax-take in Ireland.

The overall tax-to-GDP ratio measures the tax burden as the total amount of taxes and compulsory actual social security contributions as a percentage of GDP.
The overall tax-to-GDP ratio in the EU272 was 39.3% in 2008, the first year of the economic and financial crisis, compared with 39.7% in 2007. The EU27 tax ratio was 40.6% in 2000, fell to 38.9% in 2004 and then rose until 2007.
The overall tax-take in the euro area (16 countries) fell to 39.7% in 2008 compared with 40.4% in 2007. Since 2000, taxes in the euro area have followed a similar trend to the EU27, although at a slightly higher level.
The countries with the lowest total tax-take in 2008 were Romania (28.0%), Latvia (28.9%), Slovakia (29.1%) and Ireland (29.3%). These are in marked contrast with the countries that had the highest tax-take i.e. Denmark (48.2%) and Sweden (47.1%).

This information comes from the 2010 edition of the publication Taxation trends in the European Union issued by Eurostat, the statistical office of the European Union and the Commission’s Directorate-General for Taxation and Customs Union. This publication compiles tax indicators in a harmonised framework based on the European System of Accounts (ESA 95), allowing accurate comparison of the tax systems and tax policies between EU Member States.

Labour taxes – Ireland at the lower end of the spectrum
The largest source of tax revenue in the EU27 is labour taxes, representing over 40% of total tax receipts, followed by consumption taxes at roughly one quarter and taxes on capital at just over one fifth.
The average implicit tax rate on labour, a broad measure of the tax burden falling on work income, was almost unchanged in the EU27 at 34.2% in 2008 compared with 34.3% in 2007, after having declined from 35.8% in 2000. Among the Member States, the implicit tax rate on labour ranged in 2008 from 20.2% in Malta, 24.5% in Cyprus and 24.6% in Ireland at the lower end of the spectrumto 42.8% in Italy, 42.6% in Belgium and 42.4% in Hungary at the upper end.

Capital Taxes – Ireland at the lower end of the spectrum
In the EU27, the average implicit tax rate on capital for the Member States for which data are available was 26.1% in 2008 compared with 26.8% in 2007. The lowest implicit tax rates on capital were recorded in Estonia (10.7%), Lithuania (12.4%) and Ireland (15.7%), and the highest in the United Kingdom (45.9%), Denmark (43.1%) and France (38.8%).

Corporate Taxes - Ireland at the lower end of the spectrum
Corporate tax rates in the EU27 continued their declining trend in 2010.The highest statutory tax rates on 2010 corporate income are recorded in Malta (35.0%), France (34.4%) and Belgium (34.0%), and the lowest in Bulgaria and Cyprus (both 10.0%) and Ireland (12.5%).

[ang]

What has really hit home today is the overly optimistic Growth figures that the DoF have been projecting up to 2014.

At the same time you cannot expect growth if you take 7BN out of the economy, this is being done only to let the bond markets see that the Government are prepared to play tough.

It's the waste within the system that eats the money supply which is causing the problem and the big Corpos using the "double irish" to protect profits.

We do all these deals with pharmacutecals to allow them to sell us the product manufactured here at a higher rate to allow us to keep the jobs but is it really cost effective?

These are just a few things that need to be sorted out to try to find balance.

We need to get manufacturing going and wind wave energy etc. if we have any hope of getting any sort of recovery.

[Newsy]

No disrespect C Flower, but I can't get my head around the massive debt hole that we are in. I listen to lenihan and I know, that HE doesn't know what the hell he is talking about. He is a good bluffer and because of that, this hole is getting bigger, by the day.

What we need is a sense of urgency, a focus toward purpose and a determination to get the job done.

We need a sense that we are all in this together, but that isn't there.

I was listening to Sarah Burke on Vinney and she said that an organisational structure such as the HSE takes about 5 years to be properly in place. Organsationally, this country needs a massive shift in focus, purpose and determination. We don't have 5 years to get the job done.

[ang]

I don't think too many of us can get our heads around this and I would imagine it's all been designed that way.

It does help take the spotlight off 90BN going in to worthless banks though.

Shock Doctrine again !!!!

[C. Flower]

No disrespect C Flower, but I can't get my head around the massive debt hole that we are in. I listen to lenihan and I know, that HE doesn't know what the hell he is talking about. He is a good bluffer and because of that, this hole is getting bigger, by the day.

What we need is a sense of urgency, a focus toward purpose and a determination to get the job done.

We need a sense that we are all in this together, but that isn't there.

I was listening to Sarah Burke on Vinney and she said that an organisational structure such as the HSE takes about 5 years to be properly in place. Organsationally, this country needs a massive shift in focus, purpose and determination. We don't have 5 years to get the job done.

We're not all in this together Newsy, a small layer of people are, and have been, out to benefit themselves at the expense of the rest.

They have had nearly three years to carefully reshape the Public Sector and stop waste but are not interested in that. Waste to us is often a fat contract to their friends.

I think that we do need to be clear about the problem because there is now definitely an attempt to bring in shock measures of destruction.

I'd like to see this thread build up a simple picture of what our income and outgoings, including banks items, are. The first thing that struck me from starting to do that is that tax cuts and exemptions were and still are a big part of the problem.

The figures are changing and elastic, but once we have a basic picture its much easier to follow.

Would anyone like to do a "Ball Park" list of the Banking and NAMA costs?

[C. Flower]

http://www.irishtimes.com/newspaper/...reaking19.html

Plenty of ball park figures here -

Ireland had the largest budget deficit in the European Union region last year, new figures revealed today show.

According to European statistics office Eurostat, the country's budget deficit was 14.4 per cent of gross domestic product (GDP) in 2009, ahead of Spain at 11.1 per cent and Portugal at 9.3 per cent.

Ireland's deficit is set to rise to an unprecedented 32 per cent this year due to the one-off costs associated with the bank bailout.

Data for Greece was not included in the report, as it is still being assessed for quality, and will be published next month instead.
In the wider European Union, the UK came in second to Ireland, recording a shortfall of 11.4 per cent of GDP. The British government this week announced a raft of spending spending cuts intended to reduce the country's deficit and allow it to begin repaying debts.


Ireland was among the 11 states that had a debt to GDP ratio in excess of 60 per cent at the end of 2009, at 65.5 per cent. This compares with 116 per cent in Italy, 76.1 per cent in Portugal and 68.2 per cent in the UK.
European finance ministers agreed on October 19th to toughen sanctions for breaches of fiscal rules, though stopped short of more automatic penalties some countries had demanded.

The Government has committed to reducing the current budget deficit to 3 per cent of gross domestic product by 2014. It yesterday reaffirmed this commitment, despite the concerns expressed by the Economic and Social Research Institute (ESRI) that it might be more feasible to extend the target for another two years.

Taoiseach Brian Cowen said that extending the deadline would only increase the national debt and the debt repayments.
A combination of the economic slowdown and the cost of bailing out the banks is partly repsonsible for the ballooning national debt.

The Government is expected to announce an adjustment of €4.5 billion in the upcoming budget.

The State is also facing an interest bill of about €7 billion on its national debt next year, it was confirmed yesterday. Speaking to the Dáil’s Committee on Public Accounts, the Department of Finance's secretary general, Kevin Cardiff, agreed under questioning that an estimate of €7.5 billion was “about right” for the interest bill faced by taxpayers on the national debt.
Committee member, Deputy Sean Fleming, estimated that, taking into account the €50 billion bill for bailing out the banks, the national debt would hit €150 billion at the end of the year, an estimate with which Mr Cardiff agreed.

On the basis that the Republic is paying an average interest rate of just under 5 per cent, Mr Fleming said this implied €7.5 billion to cover the interest alone.

Mr Cardiff estimated that the promissory notes the Government intends to use to fund the bailout of Anglo Irish Bank, the EBS and Irish Nationwide would cost €30 billion.

He said that the National Treasury Management Agency (NTMA), which is charged with managing the State’s debts, will borrow €3 billion a year over the next decade to fund the notes, which are legal promises to provide the finance to the banks as they need it.

[whydontwe]

I'm not an economist (like the Min for Finance???)....but my latest take on it is this: It's been said that the govt must have known for over a year that €1.5 billion in interest was going to be payable from day one on much of the 'bail-out'....but in several news 'blathers'...Lenehan "neglected" to mention same!!
Also....why,why,why...is the media not pushing to have names (actual names) of all who will benefit from our austerity in this fiasco?? Cui bono?

[C. Flower]

I'm not an economist (like the Min for Finance???)....but my latest take on it is this: It's been said that the govt must have known for over a year that €1.5 billion in interest was going to be payable from day one on much of the 'bail-out'....but in several news 'blathers'...Lenehan "neglected" to mention same!!
Also....why,why,why...is the media not pushing to have names (actual names) of all who will benefit from our austerity in this fiasco?? Cui bono?

The people collecting the interest, for a start

[whydontwe]

Forgot to say....I heard news report that the bond-market 'geniuses' have reduced their interest rate to Britain, thanks to (because of?) the severe austerity measures placed on the British public by their 'sterling' finance minister! Any bets that the 'copper-copiers' here will spew out a response that...."severity is working for Britain....it will work here...so our approach is correct"...or drivel to that effect?? Wait for it...the muppets in the Dail are incapable of even coming up with a decent original retort to the crisis....wait and see!! Unbelievable!!

[C. Flower]

A few more ball park (or should it be "knocked out of the park ball") figures

http://www.irishtimes.com/newspaper/...281721074.html

The process of winding down Anglo Irish Bank by splitting it in two is likely to begin early next year, Mr Cardiff said.

His colleague Ann Nolan said the remaining €19 billion worth of property loans on the bank’s books are due to transfer to State toxic assets agency, Nama, over the next two weeks.

Ms Nolan told the committee the bank will start transferring the loans to Nama this weekend and that the process would take about a fortnight.

Anglo Irish is due to transfer a total of €19 billion worth of property loans to the agency, which will buy them at a 67 per cent discount, implying that it will pay about €6.3 billion for the debts.

The cost of recapitalising Anglo Irish stands at €29.3 billion, although Mr Cardiff reiterated that a worst-case scenario would require a further €5 billion.

Mr Cardiff defended the use of advisers such as lawyers Arthur Cox, merchant bank Merrill Lynch and accountants PricewaterhouseCoopers, between September 2008 when the Republic’s financial crisis unfolded and earlier this year.

A report by the Comptroller and Auditor General shows that taxpayers paid out a total of €34 million for the aid provided by these and other firms.

Some committee members argued that the Government chose not to take some of the advice offered, and suggested that the expertise offered by the firms was open to question in any case.

The department, and agencies such as the Central Bank and NTMA, hired these advisers. Arthur Cox was the single biggest beneficiary, earning €9.7 million for its services between September 2008 and last July.

Mr Cardiff argued that the quality of the advice was very high, and said that in many cases it was necessary to use international firms such as Merrill Lynch because of their “reach” and “expertise”.

Although not to take their advice against a blanket bank guarantee.

[whydontwe]

C. Flower,
there was a comment in the media last week to the effect that Lenehan was v/sharp..."he has a legal background" ! Is'nt it marvelous that within the govt...and other parties...there are SO many 'experts'...yet we have to employ all these other 'geniuses' to help us out of the morass that they pushed us into? Why doesn't the media (if it's honest) find out the exact relationships going on here? I'll 'eat my Kerry cap' if absolutely no one in politics is related to any one benefitting from all this money (muck) spreading!! The media want to "get the lead out"....'cause more and more people I know....are saying that they are 'owned' by the politicians! CUI BONO!

[ang]

DoF figures have been projecting growth of 4% per annum from 2011 to 2014 clearly way out figures that simply defy logic.

We really need to get real here the figures we are being drip fed are clearly unsustainable and whatever else that could be lurking known or unknown will knock us over.

The main parties even attempting to say we can do this goes beyond all reason and I would like them to give us clearly defined figures on how we can do this. (Allowing for at least another 10BN for banks and emergencies)

They would certainly need Merlin to work it all out for them, they don't have a clue.

[disability student]

I would expect the revenues to be around 28-29BN mark. 32Bn is unrealistic given the fact re huge unemployment and high rate of various business closing down all over the country.

Bear in mind that DOF usually get their figures (projections and estimates) wrong nearly every time.

Bank bailout interest rate bill for a decade at least 1.5BN.

[C. Flower]

The "Irish" Mail today (Warren Swords) has reported that the ECB has put €260 billion in loans into the Irish economy. Colm McCarthy on RTE radio day said the figure was incorrect and that some items had been counted twice.

It is a useful article in clarifiying the types of loans.

- lending to banks
-cashing in NAMA bonds
-depositing cash in the banks (not giving it, depositing)
- buying Irish bonds on the open markets

Is that all?

Swords says that both the ECB and the Irish Central Banks would not confirm and said the information was secret.

He says that the total on loan from the ECB to the Irish banks is €121 billion - and that the amount increased by 23 billion in September.

He says that there are also billions in deposits.

In December 2009 the amount on deposit was confirmed as 41 billion.
Swords says that this brings the total to more than €160 billion.

The ECB is also buying NAMA bonds (another form of lending) and this money is being used to buy distressed property loands and financial products.

54 billion has been paid so far towards distressed loans(subject to haircut), being accepted as collateral by the ECB.

It has been obvious that the ECB has also been buying Irish bonds on the open market, as no one else wants them. This money is funding our day to day spending. The exact amount isn't known. The ECB appears to have intervened and bought Irish bonds last week, when the spreads between Irish and German bonds broke records.

Last week, Lenihan paid off 7.9 billion euros to Anglo Bondholders. I'm not clear whether or not this required more ECB borrowings.

[C. Flower]

http://namawinelake.wordpress.com/20...out-the-banks/

Namawinelake has the official estimate for the bank bailout here.