The Impact Analysis produced by the Department of Finance this morning should have been available on Wednesday evening, a few hours before TDs and senators voted through emergency legislation. The analysis gives an overview to the benefits and risks to the deal.
But if the Impact Analysis is correct with its figures, then we should be able to cut austerity in 2013 by €500m, equivalent to two times the expected revenue in 2013 from the new property tax.
This is the table produced by the Department of Finance.
The “fib” is the payment of interest on the €25bn of new Government bonds. Whilst it is true that the Government will be paying interest at about 3.3% or €800m in total, it will be paying that to the Central Bank of Ireland. The Central Bank of Ireland must pay 0.75% to the ECB, or €188m but the remainder is GIVEN BACK to the Government, that is, the Central Bank hands back €612.5m. [UPDATE AND CORRECTION: The Central Bank will be foregoing interest on the Exceptional Liquidity Assistance provided to IBRC at present, and the Department of Finance says that in 2013, this will balance with the new income from the Government bond. That is still not correct, as the Central Bank charges 2.5% interest on ELA and will now be paid 3.3% on the Government bond, that is, there should be a saving of 0.8% of €25bn or €200m, so not as big as above, but still substantial]
So the Government should be able to make its commitment to the Troika in 2013 and keep the general government deficit below 7.5% of GDP but it will have €612.5m* to spare which could be used in all manners of ways, but the most economically valuable would be in stimulating the economy, with the aim of creating and safeguarding jobs.
Y’know, like the Government claims is its primary focus.
*The positive effect seems to be just €200m because the Central Bank will now be losing interest on ELA, which partly offsets the gain on interest on the new Goverment bond.
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I wish I understood the hyieroglyphics, but the whole thing goes along with my feeling that the ‘deal’ is an ephemera, deliberately complex, only the acolytes in the ECB understand it, and they tell DoF what to write.
@NWL
The inclusion of ELG costs in the above is a bit of a nonsense. If IBRC fail to pay bonds or depositors, then the liquidator should have a balance sheet surplus equivalent to the amounts not paid, based on the last IBRC balance sheet.
There appears to be an item that both IBRC and the government are being very coy about. i.e IBRC losses from June 30th 2012 to date of liquidation.One wonders if there have been been further significant write-downs of loans.
[...] at the incredibly sharp NAMA Wine Lake have went over the figures and how the government is already ‘fibbing’ and understating the room for cushioning austerity and providing some form of …, who’d have thunk [...]
[...] the incredibly sharp NAMA Wine Lake have went over the figures and how the government is already ‘fibbing’ and understating the room for cushioning austerity and providing some form of …, who’d have thunk [...]