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.