Monthly Archives: March 2013

The debate on debt may go down as the defining debate of this decade. Everyone is painfully aware that after a borrowing-fuelled consumption and property bubble, Ireland is now reeling from the hangover.

The government is over-indebted, businesses are over-indebted, and families are over-indebted. Even the banks themselves are over-indebted, mandated by the troika to shrink their balance sheets, reining in credit for everyone else as a result. As a nation, we are among the world’s leaders in the borrowing race, total private sector credit standing at over 300% of GDP, even after IFSC activities are stripped out, and general government debt nearing 120% of GDP.

This debt overhang is undoubtedly undermining investment, job-creation and economic growth. Everyone is spending less, borrowing less, investing less and busy paying down loans to ‘repair their balance sheets’. Even though Ireland’s savings rate has increased markedly in recent years to about 11%, investment as a proportion of GDP is only 10%, near record lows and about half of where it needs to be at to retain and improve the country’s production capacity. Continue reading →