1. Ireland: Debt Dynamics John FitzGerald Oireachtas Committee, 26 th October 2011 www.esri.ie

2. Introduction Origins of Crisis Tackling the Crisis Exit from the Crisis Everything depends on solving Euro zone crisis

3. National Debt, Gross

4. Fiscal Action, € billion How much to do in 2012? €3.6 billion or €4 billion?

5. Exit from the Crisis Permanent loss of output Real depreciation through cutting costs Exports had a “good” crisis. Balance of Payments surplus – rising Major changes in private sector balance sheet When will private balance sheet be restored? Consumption and investment eventually rise Domestic demand is more employment intensive

6. Balance of Payments Surplus

7. General Government Deficit

8. Government Borrowing, % of GDP 201020112012201320142015 Alternative32.09.67.86.23.61.7 Dept. of Finance32.010.08.67.24.62.8 Alternative assumes: The reduction in the interest rates of July 2011 Lower than expected cost of bank recapitalisation

9. Debt /GDP Ratio

10. Preparing to Return to Markets Funded till 2013 What are funding needs post 2013? What will be the Euro area background?

11. Debt Repayment as of mid-2011

12. Conclusions Risks Everything depends on Euro zone stability Strategy for Irish return to markets 2013? To do on banks: Wean off ECB Deleverage Sell the banks to reduce debt Most important of all Return to growth