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AbstractThe national debt of Ireland is enormous. At the end of Q1 2016, the amount owed by the country
stood at €206.8bn or €43,453 for every person in Ireland. As a measure of GDP, Ireland’s debt now
stands at 80.4%. The debt soared after the global financial crisis began in 2008. From a long standing
level of approx. €40bn, Ireland’s debt jumped to over €215bn by Q2 2013.
This happened because Ireland was forced to pump over €70bn to bailout the banking sector, at the
same time the economy crashed, causing a massive collapse in budget finances.
Led by its political leaders and the banking hierarchy, Ireland now finds itself living on debt through
cheap rates of credit – largely a result of global quantitative easing. Interest on the national debt costs
€7bn per year, and whilst falling, is an enormous burden on the Irish people. Irish issued government
bonds from the crisis have maturities out past 2050, so future generations of Irish people will be
paying this part of the national debt for years.
And though the debt is quoted as a % of GDP, and may appear to be falling, it’s only because our
GDP is growing. Ireland’s nominal debt has only decreased from €215.0bn in 2013 to €206.8bn
presently. In GDP terms our debt has fallen from 124% to 80.4%*. This somewhat false sense of
achievement gets brought into sharp focus with the reality that the debt would inevitably spike back up
again in the event of an economic downturn. In any downturn, there’s a double whammy effect – more
debt needs to be issued to finance the country’s activities and GDP naturally falls as a result of
reduced economic activity.
A cautionary note of warning needs to be made in terms of our debt’s sustainability – financing debt
today is much cheaper because of the vast amounts of liquidity in the market and ultra-low interest
rates. With Ireland achieving strong economic growth over the past 2 years, this should not be taken
that manging the national debt is straight forward or painless. Ireland is susceptible to a debt crisis
should there be another economic downturn, credit crunch or any one of a long list of economic
pitfalls – such are the consequences of being a heavily indebted small open economy.
Author keywords: Ireland, National debt, sovereign debt, financial crisis, Irish fiscal crisis, leprechaun economics
McFadden, L. (2016). Ireland’s National Debt - Is the debt sustainable? Masters Thesis, Dublin Business School.