Why do we have to hit 3% by 2014?

Joeyjoejoe

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Jun 22, 2006
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Genuine question; Can anyone explain why we've to get our deficit down to 3% of GDP by 2014? Is it really going to make any difference to the euro if we do it by 2016?

Because of this decision which FF, FG and Labour are all signed up to we've to take 15 billion out of the economy.

This looks like a diktat from the EU that will wreck our economy without doing much if anything to save the euro.

Why are we doing this?
 


d-alchymyst

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Like every family we need to balance our budgets. I prefer the question - why are we targeting a deficit? Why not a target of 5% surplus in 5 years, or some other nice rounded "spin" message. Any such surplus starts the process of retiring the debt. Everything starts with the first step.
 

johnfás

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Analogies to households don't really make any sense because a household has a limited working life. If you are 60 and take out a new mortgage, the bank knows you will be a pensioner within 5 years.

I think that targets should not be based in time (which is simply arbitrary) but rather on indicators. On that basis we would reduce expenditure in line with statistics like unemployment - so our debt would fall to 8% when our unemployment falls to 10% and so on down. The reason for this is because the economic figures represent your ability to grow and repay whereas a date on a calendar does not.
 

d-alchymyst

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Actually John, the way things are, unless we get a grip, we could have a finite "working life" as a state!!

With respect, I think that we do not have the luxury of seeking support on the basis of indicators such as you outline. Who funds the interim?

Also - I think time is actually one of a very few constants ...
 

stripey cat

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It's an arbitrary target, which was hoped would reassure the markets.

It didn't, because they know we can't do it.

The only party saying we shouldn't go on this economic suicide mission is Sinn Fein, and they are derided by the media and the other parties.
 

johnfás

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Actually John, the way things are, unless we get a grip, we could have a finite "working life" as a state!!

With respect, I think that we do not have the luxury of seeking support on the basis of indicators such as you outline. Who funds the interim?

Also - I think time is actually one of a very few constants ...
The debt levels are insurmountable - a default is inevitable and then growth should be based on targets. Basing it on time doesn't mean anything - it is simply arbitrary and may be either good or bad for the economy just as a flip of a coin.
 

johnfás

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It's an arbitrary target, which was hoped would reassure the markets.

It didn't, because they know we can't do it.

The only party saying we shouldn't go on this economic suicide mission is Sinn Fein, and they are derided by the media and the other parties.
Michael Noonan was almost suggesting a fairly significant default of debts relating to the banks last night.
 

Cassandra Syndrome

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Its just a figure. Keynesians like to think society and humans can be neatly expressed mathematically.

If we focus more on real wealth creation, savings and investing and the elimination of the debt monkey, these contrived figures would take care of themselves.
 

Nemi_

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For me, the question is more why anyone thinks its possible to wait until 2014 before reducing our deficit to 3% or less. This 'front-loading' phrase is misleading. The National Pension Reserve Fund was front loading. This extra borrowing the Government are intending to take on is all back loading.

Is anyone particularly surprised that no-one wants to lend us money if we're only going to spend it on things like pensions that will do nothing to increase our capacity to repay those borrowings?
 

johnfás

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For me, the question is more why anyone thinks its possible to wait until 2014 before reducing our deficit to 3% or less. This 'front-loading' phrase is misleading. The National Pension Reserve Fund was front loading. This extra borrowing the Government are intending to take on is all back loading.

Is anyone particularly surprised that no-one wants to lend us money if we're only going to spend it on things like pensions that will do nothing to increase our capacity to repay those borrowings?
We have no capacity to repay the level of debt irrespective. That is why the bond markets don't give a hoot what the Government announces. Everybody knows that a default is inevitable and if it is not announced now, it will be once we can't pay back our loans in two years when the IMF departs.
 

Harmonica

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On the current plan our national debt will pass 100% of GDP which is not sustainable. If we aim for 3% by 2014 maybe we will make by 20015 or 2016. If we aimed for 2016 when would actually make it. The more we borrow the higher the interest payments & we need to stop relying on foreigners to fund our country.
 

d-alchymyst

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I think it was Winston Churchill who said "If you're going through hell, keep going"!

If war in Korea breaks out, or another 9-11 occurs, or we have another 1973/4 style oil blockade, we will fall off the radar pretty quick. We made this, its ours to fix. We should not be hoping to use the threat of another type of catastrophe to get ourselves out of this hole.

Seeking or aiming for a default is both cowardly, and unworthy.

Lets be honest, we collectively democratically elected this shower, and we all - in the main - sought the loans to buy the properties that the developers sought other loans to build! Some of us also bought the cars, and second properties here, there and everywhere. So now we have to deal with the fall-out.

So what do we do about it. First, lets eradicate the deficit - we can do it, even though it will be difficult. Second, we have a much stronger entrepreneurial capability than the last time we came close to economic ruin, so lets enable and support it. Lets help our businesses to grow and to create more work and jobs.

Thirdly, lets get over ourselves, and start thinking and acting like we can solve this. If it does in fact come to default, then at least lets be able to say we tried our best.
 


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