I think the answer to this question depends on many factors that have been extensively investigated on these forums - mainly thanks to Brendan for provoking debate and providing objective and accurate data.
I have thought through a number of questions to help us answer the title question.
Is our current level of national debt sustainable?
This generates three further questions.
1. Can we pay down the debt?
From events this week it is clear that paying off debt is not on the agenda, servicing the interest is the issue.
2 Can we afford the interest rate?
Again, this week's events appear to have made it possible to get a good interest rate on our debt, so the question reduces to whether we can balance our budget at these rates of interest on our debt.
3 Can we stop the debt from rising further?
This is slightly trickier and dependent on whether the banks will need further capitalisations from the state and again, whether we can eliminate the current budget deficit (interest repayments included)
This leads us to a second key question
Will we avoid further bank recapitalisations
There are a few key issues here:
1. Are recapitalisations needed?
2. If so, will the state have to stump up or will some EU mechanism be put in place to recapitalise banks for future losses?
There has been much debate on this, mainly around the possible tsunami of mortgage debt and whether NAMA will realistically break even.
Is it possible to reach an agreed central estimate on what's likely?
If this could be resolved, I think we the could focus solely on the third and, in my opinion, the most important factor all along:
Can we balance our budget deficit?
Our current budget deficit stands at €10bn. Extensive measure have been taken over the last 3/4 years to get this down.
In spite the "success" of revenue raising measures such as the USC, progress on spending cuts has been largely thwarted by rising national debt (and interest rates), increased social welfare costs, continued lack of progress on getting value for money from health and the limited benefits of the Croke park deal to date.
In a stretched economy that raises €40bn in revenues and spends €50bn per annum, are there realistic means by which this €10bn gap can be brought to manageable levels? If so, what are they?
In my mind this leaves us with two key questions.
1. How to plug the €10bn deficit?
2. How to get off the hook for any further potential bank losses?
Any thoughts?
I have thought through a number of questions to help us answer the title question.
Is our current level of national debt sustainable?
This generates three further questions.
1. Can we pay down the debt?
From events this week it is clear that paying off debt is not on the agenda, servicing the interest is the issue.
2 Can we afford the interest rate?
Again, this week's events appear to have made it possible to get a good interest rate on our debt, so the question reduces to whether we can balance our budget at these rates of interest on our debt.
3 Can we stop the debt from rising further?
This is slightly trickier and dependent on whether the banks will need further capitalisations from the state and again, whether we can eliminate the current budget deficit (interest repayments included)
This leads us to a second key question
Will we avoid further bank recapitalisations
There are a few key issues here:
1. Are recapitalisations needed?
2. If so, will the state have to stump up or will some EU mechanism be put in place to recapitalise banks for future losses?
There has been much debate on this, mainly around the possible tsunami of mortgage debt and whether NAMA will realistically break even.
Is it possible to reach an agreed central estimate on what's likely?
If this could be resolved, I think we the could focus solely on the third and, in my opinion, the most important factor all along:
Can we balance our budget deficit?
Our current budget deficit stands at €10bn. Extensive measure have been taken over the last 3/4 years to get this down.
In spite the "success" of revenue raising measures such as the USC, progress on spending cuts has been largely thwarted by rising national debt (and interest rates), increased social welfare costs, continued lack of progress on getting value for money from health and the limited benefits of the Croke park deal to date.
In a stretched economy that raises €40bn in revenues and spends €50bn per annum, are there realistic means by which this €10bn gap can be brought to manageable levels? If so, what are they?
In my mind this leaves us with two key questions.
1. How to plug the €10bn deficit?
2. How to get off the hook for any further potential bank losses?
Any thoughts?