Once again, the mainstream media has called an end to the Eurocrisis, this time in Ireland. The Irish should be pleased that they are saving €2bn a year in financing costs over the next ten, but this is at the expense of future generations who will be paying off the bank bailout until 2043.
This amount of money is a lot in a small economy, but the Irish fiscal condition is still in a parlous state. The budget deficit for 2012 was 13.4% after a mind-blowing 31% in 2011. In euro terms, the deficit was €4.6bn, over €1000 per Irishman. By reducing this number €2bn under the deal, the deficit will fall to €2.6bn which translates to 7.8% of GDP. To put this figure in perspective, it is higher than that of Greece, Italy and Portugal and only a little lower than Spain’s 9%.
This means that the Irish debt pile will continue to grow no matter how happy investors are that they have another place to put their money with an implicit ECB guarantee. The total debt is currently 106%, and Ireland will be running deficits for the next three years at the least so this number is heading to 120%, the Italy zone.
The Irish aren’t worried. While the euro is slowing choking the country to death, at least they have delicious food and beautiful weather to keep them happy during this economic hardship.