GOVERNMENT DEBT

The cost of the recession and bank bailout is pushing our economy to breaking point. Latest forecasts from the Department of Finance estimate our debt to GDP (gross domestic product) ratio at 111% by 2013. Stockbroker forecasts believe this is an underestimate and forecasts range from 114% to 120% of GDP by 2013-14.

This key measure shows the size of the debt compared to economic output each year. As a rule of thumb when debt to GDP goes over 100% things are getting tricky for an economy, says the Sunday Business Post.

The portion of this ratio attributable to the bank bailout is variously estimated at 36% to 45% of debt to GDP. The ECB has said that Ireland taking on the full burden of its bank debt is sustainable, even though the Government is arguing otherwise. Government requests to allow burden sharing – or burning – of junior bondholders were met with an unequivocal no by Europe. The ECB and ECB/EU/IMF troika have made it clear they are keeping the economy afloat with massive liquidity injections into the banks and the bailout package so they’re calling the shots.