News in Brief: Such a Lot of Rogues in a Nation

On Sunday 28th November 2010 the Fianna Fáil government of Ireland, which now governs without the mandate of the electorate, signed a contract with the International Monetary Fund which guarantees a crippling debt burden for the Irish taxpayer to bailout the financial institutions of this country. The government entered into such negotiations with the European Central Bank and the IMF in secret whilst denying the fact to the people of Ireland. Even after full disclosure was made to the public there was a seemingly endless amount of spin designed to confuse and bewilder. This was done to ensure that members of the community would either submit to the will of the government or cease caring. To a great extent the government have succeeded in this plan. It is for this reason that it is now vital that the governments ‘programme for recovery’ is laid bare in the most simple of terms. This is a matter of economics, and therefore it is a matter of rudimentary mathematics. Please do not take fright at the mention of mathematics, it is actually far more simple than one would imagine.

It is a matter of pride to myself that I have come out through third level education without a single mathematics qualification; it is not advised that others do likewise, this is said only to show that life without simultaneous equations is possible (I did make it my business to learn mathematics to prove to myself that it can be done).

One must imagine the economy of any nation as a bathtub. In this case water is the money, the tap (faucet in the United States) is the revenue or income of the state, and the plughole is its debt or costs. It is imperative that our bathtub neither empties or overflows. When empty the country is ruined, when overflowing someone will invade (so up public spending). What is desired in a good economy is that the tub is more full than empty and that there is at least as much water coming in as there is going out (equilibrium). Now the Irish bathtub is filled by two taps; revenue (tax and such like) and Official Development Aid. In total this amounts to an annual €76 billion and falling. Leaving the tank is the current national debt of €108.6 billion. This means that the economic stability of Ireland’s bath is €76 billion minus 108.8 billion; negative economics. Ireland is losing water at a rate of €32.6 billion every year; meaning that equilibrium is lost and if this trend continues the bath will be emptied. Enter the IMF. The deal which the government have reached with the IMF is one in which the Fund and its partners will fund (lend) Ireland to the tune of €85 billion with a contingency fund (overdraft) of €25 billion at 5.8% interest (variable). This means that Ireland has a debt to the IMF of €110 billion, plus €6.38 billion (Ireland will use the overdraft): in total this is €116.38 billion over a period of nine years. Ireland is required to pay back €12.9 billion per year for nine years.

Problem. Ireland is worth negative €32.6 billion per year. Add to this the nine year IMF debt and Ireland is working at minus €45.5 billion each year. This negative figure is the bottom line, and somehow Ireland is required to pay up.

Jason Michael

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