As someone who has watched in frustration as both our Minister for Finance Michael Noonan and Department of Finance have consistently maintained that our debt:GDP % is “sustainable” on the basis that it will eventually come down, it came as a welcome, though surprising, relief last night to hear Brian Hayes, junior minister for finance at Brendan Howlin’s Department of Public Expenditure and Reform, say that the debt was “unsustainable”. Minister Hayes was speaking on RTE’s Prime Time current affairs programme and his statement was a bald “our debt is not sustainable” This contrasts with, for example, the view of the Department of Finance which in May 2012 produced a document “The Irish Economy in Perspective” from which the graph above is extracted, along with the official view that our debt was “sustainable”
To me, this was a “game changer” of “seismic” proportions, because up to now, the official line has been debt which will reach €190-200bn next year or about 120% debt:GDP is “sustainable” and indeed up to now, it was Minister Hayes himself who was the greatest cheerleader of the “sustainable” debt claim. “Remember the 1980s” he used say when our debt:GDP peaked at 118% in 1987 and it was subsequently whittled away over the following two decades so that by 2007, it was close to 25%.
Former school teacher, Minister Hayes hasn’t shown any independent streak in government which would suggest he was going on a solo-run yesterday, but unfortunately neither he nor his colleague on the Fine Gael backbenches, Paschal Donohoe who appeared on the Vincent Browne show later last night, was quizzed further over this apparent change of heart.
Because if our debt is not sustainable and that is the official line, then what happens if we do not get a debt deal in the EU which reduces the debt? On Twitter last night, Professor Karl Whelan of UCD referred to a former presidential advisor to US presidents in the 60s and 70s, Herb Stein who said “if something cannot go on forever, it will stop” or “if something is not sustainable, sooner or later it will stop”. So unless there is a debt deal, it seems the official line is that Ireland will default.
For once, the descriptions “seismic” and “game-changing” seem apt.
Meanwhile in Europe, there doesn’t seem to be a snowballs chance in Hell that there will be a deal to address Ireland’s bank debt by 30th October as committed to by economics commissioner Olli Rehn AND Enda Kenny.