As a part of yesterday's discussion about the successes of Irish economic policies since the end of the Eurozone crisis, I posted on Twitter a chart showing two pivotal years in the context of changing fortunes of Irish Government debt sustainability. Here is the chart:
The blue line is the difference between the general Government deficit and the primary Government deficit, which captures net cost of carrying Government debt, in percentages of GDP. In simple terms, ECB QE that started in 2015 has triggered a massive repricing of Eurozone and Irish government bond yields. In 2012-2014 debt costs remained the same through 2015-2019 period, Irish Government spending on debt servicing would have been in the region of EUR 49.98 billion in constant euros over that period. As it stands, thanks to the ECB, this figure is down to EUR 27.94 billion, a saving of some EUR 4.41 billion annually.
Prior to 2015, another key moment in the Irish fiscal sustainability recovery history has been 2014 massive jump in real GDP growth. Over 2010-2013, the economic recovery in Ireland was generating GDP growth of (on average) just 1.772 percent per annum. In 2014, Irish real GDP growth shot up to 8.75 percent and since the start of 2014, growth averaged 6.364 percent per annum even if we are to exclude from the average calculation the bizarre 25 percent growth recorded in 2015. Of course, as I wrote on numerous occasions before, the vast majority of this growth between 2014 and 2019 is accounted for by the tax-optimisation transfer pricing and assets redomiciling by the multinational corporations - activities that have little to do with the real Irish economy.