Of course it is. You don’t need to suck on the Troika’s teet anymore and you’ve grown up enough to stand on your own two feet…again. All should be right in the world unless you’ve got to pay interest on €205.9bn in debt which was only €47.2bn in 2007.
An interesting read from The Market Oracle suggests that Ireland is a long long way from getting back on its feet after exiting the bail out program as the mountain of debt will need to be serviced. Their projected 2014 borrowings of €8.3bn will be spent on interest payments alone.
When a country exits a bail out it’s reviewed twice a year and is subject to extra attention until it has paid of 75% of its debts. Ireland is expected to be paying off its EFSF and EFSM loans until 2042 and IMF loans until 2023. At the moment most of that is coming direct from the Irish taxpayer. That’s all well and good if you’ve got a healthy economy to fall back on but not if you are faced with an economy still deep in recession and part of a Euro zone that is also struggling to recover. The prospects for a bailed-out country are grim.
Businesses are still closing down, consumer spending is weak and overdue mortgages are the highest in Europe. The people are struggling. With no pick up in the economy the ability to service the debt looks to be a helpless task and one that could come back to haunt Ireland (and others) down the line. Even if they tout further defaults to solve the problem that’s double edged with the Irish taxpayer holding over 50% of bank bonds, which the rest of Europe and foreign investors bailed out of.
Holders of bonds issued by Irish banks
One part of the agreements to exit bail-out programs is what governments will do with taxes. The obvious way to raise the income is to raise them but in a struggling economy like Ireland’s it’s likely to push them over the edge.
There’s many readers on ForexLive who have consistently pointed out the future pitfalls of government debt levels, and looking with hindsight, it’s a shocking statistic that bailed out countries, who got themselves into problems through debt, are now much more heavily indebted in order to save them from the original debt. The legacy of debt payments are going to run for decades and unless economies recover to boom proportions there’s going to be a hell of a lot of pain still to come.
Roll on debt crisis round two.
Full story, and is very much a worthy read, from The Market Oracle here.