Public Finances in EMU

Économiste Monétaire

Public Finances in EMU 2009 was released yesterday by the European Commission. Here's a link to a quick summary. Here's the PDF. Ireland is on page 212 for the Member State Developments section.

Flamed Diving

I performed a search on the document for 'Ireland' and found nothing...

EDIT: Ok, found it. Page 226 (when you type it into the box at the top).

Flamed Diving

The debt ratio should reach 61.2% of GDP in 2009 and almost 80% in 2010, more than three times the value recorded in 2007. This is due to the large primary deficits as well as increasing interest expenditure and falling nominal GDP, while no impact of the government’s support measures for the financial sector is included in the Commission services’ projections.

Worrying...

Flamed Diving

Back to the quoted bit above...

So, 2007 GDP stood at ~€190bn.

By 2009, public debt will be ~€116bn. And forecast to be almost €152bn by 2010.

Of course, this does not include the NAMA setup, which will probably cost about €60-90bn.

Choosing the bottom-end, we get a debt of €212bn, which is about 111% of our 2007 GDP level.

Choosing the top-end, we get €242bn, which is 127% of our 2007 GDP level, which, interestingly enough, is exactly the level of public debt we enjoyed when the IMF were knocking at our door, back the the late 80's.


As for Germany:

In the light of higher deficits, lower nominal GDP and financial market stabilisation measures, the Commission services' spring 2009 forecast projects the debt ratio to increase from almost 66% of GDP in 2008 to around 79% of GDP in 2010. Debt developments are subject to the risks attached to the deficit and additional risks related to possible further capital injections and potential bank takeovers (with an impact on the debt, though some effect on the deficit cannot be excluded).

Which is more or less identical to the Irish forecast. Although I would possibly concede that our banking system will take a lot more work, and we, as a nation, will find it much more difficult to borrow money.

Thoughts?

silverharp

Flamed Diving wrote: »

As for Germany:

Which is more or less identical to the Irish forecast. Although I would possibly concede that our banking system will take a lot more work, and we, as a nation, will find it much more difficult to borrow money.

Thoughts?

slightly off topic but related, what kind of bag of cats are german and austrian banks holding in relation to E. Europe. it looks like there is the potential for some nasty blow ups

and back on topic, how can this RTE headline on the OECD make sense, sounds like trying to turn an oil tanker on a dime

"But it forecast that the Irish economy would shrink by almost 10% this year, one of most pessimistic predictions so far. The body also expects a further fall of 1.5% next year. "

silverharp

again a little off topic but worrying if your neighbours look like tey are imploding. Will a Russian implosion cascade into E Europe

Flamed Diving

Could you flesh this out a bit, Silver?

Économiste Monétaire

Here's a link to recent GDP figures and the projections for '09 and '10. These are the nominal GDP figures used in the document; €162bn for 2010. The OECD thing is from their twice-yearly Economic Outlook that was published today. It's an... interesting... analysis for Ireland. Japan's trade figures today were a disaster. Swedish banks are (apparently) in for a hammering on an incoming Latvian devaluation, only two weeks ago a swap line between the Riksbank and ECB was activated.

Look at the benchmark bond spreads on page 156 (or page 170/300 on the adobe page counter) and spare a thought for the poor taxpayer in Hungary. On the public finances, our interest payments on the national debt seem to be heading towards 25% of government tax revenue (and above) by 2013; it was 26.7% in 1990.

silverharp

Flamed Diving wrote: »

Could you flesh this out a bit, Silver?

just trying to guage what banana skins could throw Europe off course, a potential melt down in E Europe would affect German and Austrian banks. If Japanese exports to Russia are down more then 85%, it implies Russia is in bad shape?

just came across this, no idea how much is at risk or already written off

Flamed Diving

Oh, I didn't see the minus sign.

D'oh!

It makes sense now. That is worrying. It's like the problem is creeping up behind us while we are distracted, at home.

Économiste Monétaire

The IMF document on Ireland that's received so much press:
http://www.imf.org/external/pubs/ft/scr/2009/cr09195.pdf

silverharp

From the FT on a Russian bank bailout


"Russia is considering a banking bail-out that will go further than measures taken by the US, as fears grow that bad loans could paralyse the economy."

Igor Shuvalov, deputy prime minister, will consider taking stakes in troubled banks when a group of experts on the crisis meets on Friday to discuss ways to recapitalise the country’s banking system, according to a draft proposals seen by the Financial Times.

The proposal, one of several under consideration, would see the government issue OFZ treasury bills, a type of bond, to boost the balance sheets of the biggest banks. In return the state would get preferred shares. Unlike the US bank bail-out, the Russian scheme would see the government take board seats and get veto rights at the banks it bails out


Analysts said such a plan could allow banks to declare the true level of bad loans on their balance sheets, which, once cleaned up under the programme, would break the credit squeeze and allow them to start lending again in 2010.

About $100bn (€72bn, £61bn) in domestic loans fall due by the end of the year and the central bank has said banks’ profits would be totally wiped out if non-performing loans hit 10 to 12 per cent. Standard & Poor’s warned last week problem loans could reach as high as 38 per cent.

With inflation, high interest rates, a dearth of new credit and a sharp fall in commodity prices still squeezing companies, bankers say they fear non-performing loans could hit as much as 20 per cent of overall credit portfolios by the end of the year.

International ratings agencies Moodys and S&P have warned that Russia could need to spend as much as $40bn recapitalising the banking system by the end of the year.

Under the draft bill being considered on Friday the prefs would be convertible into ordinary shares in 10 years’ time should the bank be unable to pay back the bond when it matures in 2019. The recapitalisation funds would be limited to the top 55 banks in Russia’s 1,100-strong banking system, analysts said. The draft bill says only banks with a minimum of Rbs50bn ($1.6bn, €1.4bn, £1.0bn) in assets would be eligible.


***

If the government continues to delay, “this means that many banks will just stop operations. They will continue to exist but they won’t be able to provide new loans,” Ms Orlova said.

The government fears it could spend its entire Rbs4,000bn reserve fund and more, once it begins to recapitalise the private banking sector, she added.

But Yevgeny Gavrilen*kov, chief economist at Troika Dialog, the Moscow investment bank, said it would be best if the government did not attempt to interfere in the problem but concentrated on lowering inflation instead.