| Topic: | Re:Re:Re:Re:Re:Re:Re:Re:Re:Re:Re:Re:Safety of Post Office/Bank of Ireland savings | |
| Posted by: | Marek Wakar | |
| Date/Time: | 19/11/10 10:52:00 |
| The Irish government's debt funding problems are because the government is backing the banks. The banks are in a far worse state than ours, having lent heavily on property which has halved in value. So the government will lose money (compared with the UK where the government will, at current prices, make a profit on the bank bailout). The banks are large relative to GDP, so the losses are significant for the Irish government's credit worthiness. In addition, independently of the banks, Ireland (along with the UK) has about the highest government deficit in the OECD. The Irish are suffering because many of their taxes are raised from land transactions, which have fallen. The UK is in this situation partly because of poor fiscal management by Gordon Brown (he ran a deficit at the top of the boom, when he should have run a surplus) and also because of a greater fall in UK output than other OECD countries. It is difficult to argue that our problems are caused solely by world events when we have performed worse than the rest of the OECD (which has itself performed worse than the emerging economies). At some point both countries have to cut their deficits (whoever is in power) and there are risks to demand with doing that. But the debate is about when, not whether, to cut (and also what the balance should be between tax and spending). It is too early to see in either country whether the cuts have had an adverse effect or not. What we are seeing in Ireland is a mortgage and bank debt crisis - nothing to do with the cuts. |