Studies to look at level of debt

The construction sector could help Ireland climb out of its massive debt, according to the latest report from the European Commission on the Government’s draft budgetary plan for next year.

While the Irish budget was one of just five found to meet EU rules, the commission is to carry out detailed studies of a number of areas including non-government/private debt, which is close to 300% of GDP, and this will include looking at the role of re-domiciled companies.

They warn the expected growth — the highest in the eurozone — could be threatened by low euro area growth and that the very high private sector debt is also a threat to recovery.

But on the up side, the construction sector could push the expected growth of more than 4% next year even higher, provided that the obstacles to building, mainly in Dublin, are resolved quickly.
The commission is pushing Ireland to use whatever spare money it has to pay off the country’s debt of 110% faster.

The budget deficit will be down to 2.9% next year, just meeting the commitment to bring it to below 3% which is a very slim margin.

The commission also looked at the aggregated effect of eurozone national budgets on the euro economy as a whole.

They identified areas they fear could have a negative effect and will carry out a detailed assessment before asking for changes.

Ireland is one of the countries where there will be such a review focusing on unemployment, public debt, private debt and net international investment position — which reflects how much the country owes and owns.
Similar detailed assessments were carried out last year and the latest will be an update, given the rapid improvement in growth and the complexity of Ireland’s private debt and net international investment position.

The surge in 2011 and 2012 in US companies re-domiciling in Ireland is another issue which they are anxious to understand in greater detail.

Their contribution to the current account surplus would need to be stripped out to get a more accurate picture of the country’s true figures for exports and imports.The draft budgets will be discussed by euro area finance ministers on December 8.

This year’s figures for France, Italy and Belgium will be reassessed in March to see if they do in fact breach the EU rules.


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