Tuesday, September 24 16:35:37
Banks and the burden taken on by the Irish State to bail them out dominates Ireland's post-crisis balance sheet, a new working paper from Sebastian Barnes and Diarmaid Smyth shows.
The paper - by Mr Barnes (OECD and Irish Fiscal Advisory Council (IFAC)) and Mr Smyth (IFAC) - presents a comprehensive overview of the Government's financial position.
It looks at the evolution of Government financial assets and liabilities since the start of the financial crisis in 2008 and highlights the marked rise in indebtedness levels.
It concludes that, while the value of the Irish Government's assets and liabilities were broadly equal in 2007, by the end of 2012, liabilities exceeded assets by E135 billion (82pc of GDP).
Relative to the Euro Area, the Irish Government experienced the single largest deterioration in its financial position as a result of the financial crisis.
The rise in indebtedness in Ireland reflects a combination of large budgetary deficits and exceptional payments to the banking sector.
It finds that the Irish Government has substantial holdings of financial assets. These include cash balances, semi-state entities and investments made in the banking sector. The value of the Government's banking investments, however, has been heavily written down.
The Irish Government also faces potentially large "off-balance" sheet liabilities. These mainly relate to government guarantees in the banking sector and pension liabilities.
On a more positive note, the decision to liquidate IBRC in February is likely to lead to substantial savings for the Government although these savings will depend on Ireland's perceived creditworthiness by the markets.