It’s a no-brainer: cut the national debt now

IT seems to me most economic pundits have got it wrong. In the absence of growth (and there seems little prospect of significant growth in the short term), Ireland Inc has to reach a budget surplus in order to begin to pay off the national debt.

Our 2010 deficit is likely to be €18bn, so there must be average cuts of €4.5bn a year over the next four years. If we do not create a budget surplus, interest on the national debt (€100bn and rising), at an average of 5%, will cost €6bn a year and kill us stone dead.

We must borrow ahead for just three months — not six — so the €16bn pot the Department of Finance has borrowed ahead must be reduced to €8bn. The National Purchase Reserve Fund (NPRF) is achieving a return of 2.7% on its pot of €24bn while the Government is borrowing at almost 7%.