As we sleepwalk through crisis, it’s time to stress test our exchequer

BEFORE the good people from BlackRock Solutions and Boston Consulting Group leave the jurisdiction, they might be asked to do an additional stress test — on Ireland’s exchequer. Larry Fink and the lads carry the ultimate status of credibility worldwide. No one seems to have followed the logical conclusion of their analysis, beyond banks, for their state guarantor.

If over the next three years, house prices fall by a further 24%, unemployment rises to 15.8%, private consumption falls by 5% and investment by 3%, where does that leave government finances? If this stressed scenario and fallout is required by markets for banking reassurance, it’s equally applicable to our sovereign accounts.

Obviously some new analysis is required to convince the European Central Bank that Ireland’s insolvency is real. If international consultants explain the unsustainability of repaying our total indebtedness, they might accept the inevitable. Their denial to date knows no bounds. Fiscal facts could not be more plain. The national debt presently stands at €95 billion. This will rise by €18 billion, the current budget deficit for 2011. The IMF/EU bailout provides €50 billion to maintain state services over the three-year period. Add on ultimate liabilities from promissory notes and bank recapitalisations and the sum is heading for €200 billion.