Presentation to Social Media Conference

• 1. Irelands Public Debt CrisisIs Irelands public debt sustainable?SEAMUS COFFEY

2. May 2011Irish insolvency is now less a matter of economics than ofarithmetic. If everything goes according to plan, as it alwaysdoes, Irelands government debt will top 190 billion by 2014,with another 45 billion in Nama and 35 billion in bankrecapitalisation, for a total of 270 billion, plus whatever lossesthe Irish Central Bank has made on its emergency lending.Subtracting off the likely value of the banks and Nama assets,Namawinelake (by far the best source on the Irish economy)reckons our final debt will be about 220 billion, and I think itwill be closer to 250 billion.Prof. Morgan Kelly, Irelands future depends on breaking freefrom bailout, Irish Times, 7th May 2011 3. The Namawinelake ForecastSo general govt debt of 148bn in 2010 + 43bn deficit 2011-2014 + additional capital for banks (35bn earmarked of which25bn is described as a contingency) + debt redemption nil (rollover) + NAMA 45bn (40bn bonds including pyt for sub-20mexposures and 5bn development debt) + swapping of ECB/CBI ELA for national debt x,So 271bn + x for ECB/CBI ELA swap for general government debt.Obviously NAMA will have some value as will ELA and we start offwith some funds in the NTMA/NPRF so the net will be less than that ,but I would have said 220bn as a rough ballpark.www.namawinelake.wordpress.com, 8th February 2011 4. ReactionThere are grounds for believing that Kellys estimate is wrong tothe extent of between 50 and 60 billion and that the real figurewill be closer to 190 billion.Antoin Murphy, This time Morgan Kelly is wrong, SundayBusiness Post, 15th May 2011For undisclosed reasons, he feels the resulting figure is toooptimistic and adds a further 30 billion as a contingencyprovision. This brings his projection of the gross GGD to 250billion at the end of 2014.Kellys inclusion of 35 billion under this heading is doublecounting.Tony Leddin and Brendan Walsh, Clarity needed when figuringout Government debt, Irish Times, 20th May 2011 5. The Kelly ApproachThere is no double counting.2010 GGD: 148 billion2011-2014 Deficits: 42 billionBank Recapitalisation:35 billionNAMA: 45 billionGROSS TOTAL 270 billionPlus CB lending loss: x billionLess value of assets -y billionProjected 2014 Debt 250 billion 6. What is the reality?What is the general government debt (GGD)?What is in the GGD?What is not in the GGD?When is public debt unsustainable? 7. We are where we areHow did we get here?Where are we going? START:2007 = 47 billion MIDDLE: 2011 = 167 billion END:2015 = ??? billion 8. 2008 to 2011: From 47bn to 167bnFour reasons:1. Annual Deficits: 60 billion2. Increase in Cash Balances: 14 billion3. Bank Payments: 15 billion4. Promissory Notes:31 billion2007 GGD of 47 billion plus this 120 billion2011 General Government Debt = 167bn 9. What is in the General Government Debt? The GGD is currently made up of: - Government Bonds:80 billion - EU/IMF Loans:40 billion - Promissory Notes:28 billion - State Savings Schemes: 14 billion - Other Debt:5 billion TOTAL: 167 billion 10. What is not in the GGD?The following do not enter the GGD:- National Asset Management Agency- Irish Bank Resolution Corporation- Commercial Semi-State Companies- Central Bank of Ireland ELA- Future Liabilities (pensions, aging costs) 11. What is not in the GGD?What assets could give a measure of net debt?- Cash: 18 billion- NPRF: 5 billion- Viable Banks- AIB/EBS: 99.80% (NPRF)- BOI: 15.10% (NPRF)- IL&P:99.25%- Commercial Semi-States?- Other Assets? 12. 2012 to 2015: From 167 bn to ???Whats remaining?1. Cumulative Primary Deficits: 5 billion2. Further Bank Recapitalisation: 2 billion3. Interest on National Debt: 31 billion3. Interest on Promissory Notes:5 billion2011 GGD of 167 billion plus this 43 billion2015 General Government Debt = 210bn 13. 2015 Government DebtITEM billion2007 General Government Debt47Accumulated Deficits 2008 to 2011 60Borrowings for Cash Balances14Direct Payments to Banks17Promissory Notes to Anglo/INBS31Promissory Notes Interest to IBRC5Projected Deficits 2012 to 2015 362015 Projected General Government Debt210Cash Balance on hand18 14. Breakdown of this 210 Billion Debt2007 Pre-Crisis Debt: 47 billion2008 to 2015 Deficits:96 billionBank Related Borrowing: 53 billionCash Borrowings:14 billionTOTAL:210 billion 15. Debt Developments in 2011Some pieces of good news:1. Bank Recap Costs: 35bn versus 17bn2. Reduction in EU interest rates: c.1bn p.a.3. Double Counting error: 3.6 bn 16. Domestic UncertaintiesOn the liability side:1. Slippage in the annual deficits2. Potential Losses on 30 billion of NAMA loans3. Further losses in the banks- AIB/EBS, PTSB, BOI- IBRC- Credit unions4. Central Bank Liquidity: 66bn/45bn 17. Debt SustainabilityWhat does sustainability mean?Is there a sustainability threshold?How you stop the debt ratio rising?Will the Irish debt ratio stop rising?