Caoimhghin Ó Croidheáin writes: “We are now mainly borrowing to pay interest on the burgeoning national debt”
While much has been made recently of Ireland’s exit from the punishing EU/IMF bailout programme, Michael Noonan, the Finance Minister, has welcomed post-bailout ‘surveillance’. Dutch Finance Minister Jeroen Dijsselbloem, said Ireland would be subjected to ‘intensive surveillance’ “twice a year, but this would involve monitoring as supposed to new measures being imposed” because “under new European budgetary rules, countries leaving a bailout will be subject to extra attention until at least 75pc of the money owed is repaid.”
The Taoiseach (Prime Minister), Enda Kenny, has even gone so far as to state that Ireland would exit the bailout without the safety net of a credit line. Unfortunately for him Ireland’s economic crisis will not go away that easily. The economic consequences of the bailout may be about to bounce back and hit him in the face. Interest repayments are already taking a huge chunk out of the economy and the Irish people will be paying back EU [EFSF and EFSM] loans until 2042 and IMF loans until 2023. A fundamental economic crisis is in the making.
In 2007 Ireland’s general government debt was €47.2bn. It is estimated to be more than quadrupled to €205.9bn by the end of 2013. As the debt has grown so have the interest repayments. In 2012 the ‘underlying’ deficit (deficits excluding direct payments to banks) was €-13.5bn of which €-6.7bn was interest repayments showing that interest repayments grew to become 50% of the deficit compared to 2008 when the deficit was €-13.2bn of which €-2.4bn was interest repayments. [See table below]
[Underlying Balance = Primary Balance + Cash Interest + Prom Note Interest]
Even the somewhat positive projections for 2014 show that all the money to be borrowed, €8.3bn, is to be spent on interest repayments.
Ireland’s low corporation tax of 12.5%, and therefore a low corporation tax take, means that ordinary taxpayers are expected to make up the shortfall. For example, in 2012, the combined figure for income tax and VAT was €25.35bn while corporation tax came to €4.22bn. [See table below]
full article at source: http://www.marketoracle.co.uk/Article43172.html