Greece: Making Ireland look good?

Speaking as a philosopher, it’s slightly disconcerting to watch the land of Socrates, Plato and Aristotle turned into an international laughing-stock. But speaking as an Irishman, I am relieved that the Greeks are distracting attention from us, and even making us look good, at least if “international perception” is anything to go by.

But what’s really going on here? The government deficit in Greece is about the same as Ireland’s – so the government in Ireland is over-spending by the same amount as the Greek government. So what’s the difference? Why so much fuss about Greece? Well, Ireland is starting from a lower total national debt, so the Irish government can afford to borrow these large amounts for a few more years, unlike the Greeks. So overall, Ireland is in a better position than Greece right?

Well, hang on a second there. Ireland’s national debt, its total GOVERNMENT debt, its PUBLIC debt, is less than Greece’s, as a proportion of GDP. All well and good. But a country’s TOTAL debt is public debt PLUS private debt. Ireland’s total external debt (public debt plus private debt owed to foreigners) is 1.8 trillion, as opposed to Greece’s, which is a mere 86 billion. So external debt per capita in Greece is $3,953, compared to $448,032 per head in Ireland.

http://en.wikipedia.org/wiki/External_debt_by_country

Now external debt is a complex thing, but these figures make the basic point quite clearly: Ireland’s PRIVATE debt is much, much, much higher than Greece’s. Overall, Ireland is more in debt to foreigners than Greece. The average Greek citizen is not imprisoned by private debt, unlike the average Irish citizen. This explains why the Greek populace is kicking up more of a stink than the Irish populace – their personal debt and household debt is much lower, so they are not debt slaves. As Ambrose Bierce once said “Debt is an ingenious substitute for the slave driver’s whip”. And a whole generation of young Irish people have been turned into debt slaves. Our best and brightest, our most dilligent and responsible young people, have been totally sold out.

Sure, the Greek government and public sector is making a total mess of things, but their private banks have not screwed things up – and that’s much more important. That’s not because Greek banks are really clever – it was just lethargy on their part. Clever bankers screw countries up - they make lots of money for themselves, and then get bailed out by everyone else. It has been Ireland’s misfortune to have lots of clever bankers.

Much of Ireland’s private debt will now be transferred into public debt – via NAMA and other mechanisms. This will cost a lot. My namesake Kathy Barrington of the "Sunday Business Post" reckons the Irish bank bailout will cost the state around 30 billion euro. That’s a conservative estimate. Morgan Kelly thinks more like 50 billion euro.

Much of Greece’s national debt has been financed by private Greek savings, in the same way that Japan’s has. That’s why Greek external debt is so small. Compared to Ireland, the Greeks don’t owe foreigners anything, because, unlike Ireland, they didn’t go on a deranged binge borrowing money from foreigners. In Ireland, the borrowing binge was spearheaded by Sean Fitzpatrick at Anglo-Irish Bank, and Michael Fingleton at Irish Nationwide, with the other banks eventually going along for the ride.