Tuesday, October 30, 2012

Defusing ‘The Mortgage Timebomb’

In this weekend’s Sunday Business Post, commentator David McWilliams has an article under the title “It’s time to defuse the mortgage timebomb”.  The piece concludes with:

“In addition, the longer this goes on, the more the banks become zombie banks incapable of breathing credit into the market.  A deal must be done right now.

The banks set aside €16 billion in the last capitalisation round to cover bank loans in the residential market.  Taking the total mortgage lending book of €112 billion, the implied total default on the entire book is where we are now in terms of arrears, 16 per cent.  However, not all these arrears will be total write-offs, so there is enough cash in the tank now to do a debt for equity at 50/50 right now.  The gives the punter a break and the bank an upside option over time.

But maybe the reason the banks have been tardy in moving – after all, they were dressed down by the Central Bank last week – is that they think €16 billion isn’t enough.  If it isn’t, we need to go back to Frankfurt and come up with a figure that covers all bases and say to the ECB: “We need more cash and you will have to cough up”.

We know the Germans need a success in Ireland.  We know that we can only have success if the total banking problem is solved, and we know that the pending mortgage crisis has not been addressed yet.

Wouldn’t it be sensible to put it all in one big bang solution?”

The trouble with “big bang” or soundbite solutions is that they are rarely effective for complex problems.  At the top-level it seems the problem in the residential mortgage crisis is simple – too much debt – but there are a number of subtle complexities that mean top-level solutions will be ineffective.

Monday, October 29, 2012

Meeting the fiscal targets

The eighth quarterly review of the EU/IMF programme for Ireland was concluded last week and once again Ireland was praised for steadfast policy implementation and the expectation that fiscal targets will be met once again.  Statement here.  The general government deficit targets for 2011 to 2013 are

  • 2011: 10.6% of GDP
  • 2012: 8.6% of GDP
  • 2013: 7.5% of GDP

At the conclusion of the sixth review back in April a statement released by the Department of Finance said that:

“We are pleased that we have met our targets, all measures have been implemented and the programme is on track. This successful outcome illustrates, once more, the ability and the commitment of the Irish State to implement a challenging programme effectively.

Economic data released since the last Troika review in January has shown that the Irish Economy has returned to growth in 2011, the first time since 2007, our underlying deficit for 2011 is 9.4% - significantly ahead of the target of 10.6%, our tax take is growing and we are on track to meet our 8.6% deficit target in 2012.”

Last week the Department’s statement was equally ebullient:

“The programme remains on track and we continue to meet all of our targets. We are confident that the headline deficit targets of 8.6% of GDP will be achieved in 2012 and we remain fully committed to reducing our deficit to below 3% of GDP by 2015.

Back in April there was delight that the “underlying” deficit was below the 2011 limit.  By September that delight was that the “headline” deficit would be below the 2012 limit.  The deficit is falling (albeit slowly) but I wonder what deficit measure will be used to ensure we are below the 2013 limit?

It should also be noted that the March statement said “our underlying deficit for 2011 is 9.4% - significantly ahead of the target of 10.6%”.  What was the deficit target set at the time Budget 2011? Among other places, the answer can be found in the third paragraph of page 12 in The Economic and Fiscal Outlook released with the Decemeber 2010 budget:

“The measures being introduced in Budget 2011…will reduce the General Government Deficit to 9.4% of GDP.”

The 10.6% limit comes from the December 5th 2010 Council Recommendation to Ireland under the Excessive Deficit Procedure which set out the deficit limits for each year out to 2015 by which time Ireland has to bring the general government deficit under the Maastricht limit of 3% of GDP.  Budget 2011 was a couple of days later but as the late Brian Lenihan said in his budget speech:

In the National Recovery Plan, we have set out the timetable for achieving this adjustment over the next four years. These targets are reflected in the Joint Programme of Assistance. Because the European Commission has more conservative forecasts for the medium-term, we have been given an extra year to reach the 3% deficit target required under the Stability and Growth Pact. But this changes neither our targets nor our timetable for reaching them.

The Department of Finance deficit target for 2011 was 9.4%.  As the recent Maastricht Returns Information Note has shown the actual 2011 deficit was 13.4% of GDP, but excluding direct payments to the banks the deficit was 9.1% of GDP.  As pointed out previously this does not exclude direct receipts from the banks.  This 9.1% of GDP deficit is below the 9.4% of GDP budget day target. 

There was never a deficit target of 10.6% of GDP that we could be “significantly ahead of”.

Some quirks of national income accounting

In 2011 real GDP was 6.8% lower than the peak recorded in 2007.  In 2010 prices, real GDP was €170.4 billion in 2007 and was down to €158.7 billion in 2011.  With net exports making a positive contribution to GDP growth over the period the collapse in the domestic economy is masked in the headline fall in GDP.

Domestic Components of GDP

Sometimes when trying to find patterns in the data one discovers some of the ‘quirks’ of national income accounting.  This graphs shows subcategories from the ‘Consumption’ and ‘Investment’ components above which contributed to the rise and fall of GDP over the past decade.

Selected Components

Neither are major components of GDP.  In 2007, their total made up just 5% of GDP but by 2011 they provided just 3.2%, indicating a faster fall than for the overall GDP number over the period.  Here is a chart of them in nominal terms where the collapse in the ‘investment’ category is even more accentuated.

Selected Components Nomninal

The component of consumption is ‘expenditure outside the state’ and is spending by Irish residents on goods and services that takes place outside of Ireland.  This is a contribution to GDP as consumption is defined as:

Final consumption expenditure consists of expenditure incurred by resident institutional units on goods or services that are used for the direct satisfaction of individual needs or wants or the collective needs of members of the community. Final consumption expenditure may take place on the domestic territory or abroad.

Since 2008, real expenditure outside the state by Irish residents has fallen 32%.  Spending less money abroad may mean more money available for expenditure in Ireland.  The drop in household income means this substitution is not happened and consumption expenditure by Irish residents in the state is also falling. 

Still, it is somewhat noteworthy that the drop in something which would expect to harm other economies (where the spending was happening such as places like this) is actually recorded as part of the drop in Irish GDP.  Opposed to that, it can be said that less spending (regardless of where it happens) means less consumption of goods and services which means less satisfaction and well-being for people.

The fall in the subcategory of investment included in the graph has been even more dramatic and since 2006 in real terms is down 86%.  The ‘costs associated with the transfer of land and buildings’ include conveyance and other professional costs of property transaction as well as estate agents’ fees.  However, the biggest item in this was Stamp Duty.  The definition of gross fixed capital formation says:

3.111 . For both fixed assets and non-produced non-financial assets, the costs of ownership transfer incurred by their new owner consist of:

a) charges incurred in taking delivery of the asset (new or existing asset) at the required location and time, such as transport charges, installation charges, erection charges, etc.;

b) professional charges or commissions incurred, such as fees paid to surveyors, engineers, lawyers, valuers, etc., and commissions paid to estate agents, auctioneers, etc.;

c) taxes payable by the new owner on the transfer of ownership of the asset.

In 2006, the ‘costs associated with the transfer of land and buildings’ was €4.5 billion in nominal terms.  The amount of Stamp Duty collected from land and property in the same year was €3 billion.  Unsurprisingly, this has collapsed since and in 2010 just €0.2 billion of Stamp Duty was collected from land and property transactions, a drop of more than 90%. In 2011 the ‘costs associated with the transfer of land and buildings’ contributed less than €0.4 billion to GDP.

Perhaps surprisingly, Stamp Duty from all property transactions is included in GDP.  In general, second-hand house sales do not contribute to GDP as the purchase of the asset by the buyer is offset by the sale of the asset by the vendor.  Sales of new houses do add GDP as there is a net addition to the capital stock and the collapse in purchases of new homes by the household sector accounts for much of the 55% drop in real investment seen over the past four years.  However, Stamp Duty and related transaction costs from all property transactions are included in GDP.

Since 2007, real GDP has fallen about €12 billion in 2010 prices.   Using the same prices, real total domestic demand has fallen by about €33 billion (driven by the collapse in investment with smaller falls in final consumption expenditure and net government expenditure on goods and services).  

From the above charts we have seen that around €3.5 billion of this real drop (equivalent to 30% of the fall in GDP and 10% of the drop in total domestic demand) is due to Irish residents spending less money on consumption outside of Ireland and the virtual collapse in Stamp Duty liabilities from land and property transactions.

Wednesday, October 24, 2012

The ‘Underlying Deficit’ and the banks

This week the Department of Finance have released the Autumn Maastricht Return and a useful information note which includes this table.

EDP Table A

Ireland entered the Excessive Deficit Procedure (EDP) in April 2009 and the deadline for restoring the deficit to below the 3% of GDP Maastricht Limit was subsequently extended twice.  The current deficit limits come from a December 2010 Council Recommendation and were set at

  • 2011: 10.6% of GDP
  • 2012: 8.6% of GDP
  • 2013: 7.5% of GDP
  • 2014: 5.1% of GDP
  • 2015: 2.9% of GDP

It seems that the actual deficit for 2011 of 13.4% of GDP was hugely in excess of the 10.6% of GDP limit set under the EDP.  However, the information note highlights that part of the reason for the 2011 deficit was because “[a] significant amount of this deficit arises from capital injections into financial institutions that took place in July”.

The information note then presents the underlying deficit which “excludes the effect of capital injections into financial institutions in 2009, 2010 and 2011 and gives a better picture of the balance of receipts and expenditures of general government.”  This was presented in next table.

EDP Table B

Ireland’s underlying deficit for 2011 was estimated to be 9.1% of GDP well below the 10.6% limit set under the EDP.  So using the underlying deficit Ireland “met the deficit target”.

For 2012, it can be seen that General Government Balance and the underlying deficit are the same (8.4% of GDP) as there are no planned deficit increasing capital injections for the banks this year.  With the EDP deficit limit of 8.6% it can be seen that for 2012 Ireland is in line to “meet the deficit target”.

However, direct capital injections are not the only impact the banking-related measures that have been introduced over the past few years have on the general government balance.  If one is trying to get “a better picture of the balance of receipts and expenditures of general government” then it would be prudent to remove all the temporary effects on the bank bailout on the general government balance.

We can get the impact of the banks on the 2012 General Government Deficit from two sources:

1. From the September Exchequer Statement we must include the following receipts and expenditures:

Non-Tax Revenues:

  • Central Bank Surplus: €958 million (usually around €200 million)
  • Guarantee Fees: €799 million
  • Contingent Capital Interest: €300 million

Non-Voted Expenditure*

  • Interest: some portion of national debt interest (€4,065 million to date)
  • EBS Promissory Note: €25 million (no general government balance impact)

(*There is also €1,300 million for the purchase of Irish Life but that is classed as a financial transaction rather than expenditure as the Exchequer added an asset worth an equivalent amount (apparently)).

Determining how much of the debt interest that will be paid this year is due to bank bailout is difficult as borrowing is not made for specific or earmarked purposes.  We could as easily say that the bank bailout money came from Income Tax while social welfare payments came from borrowing as say the bank payments came from borrowed money. 

However, it is pretty clear that the bank payments have increased the Exchequer Borrowing Requirement over the past few years.  Here are the payments that have been for the banks from the Exchequer Account since 2009.

  • 2009 – Anglo Irish Bank: €4,000 million
  • 2009 – National Pension Reserve Fund: €3,000 million
  • 2010 – Irish Nationwide: €100 million
  • 2010 – Educational Building Society: €625 million
  • 2011 – Irish Life and Permanent: €2,300 million
  • 2011 – Promissory Notes: €3,085 million
  • 2011 – Bank Recapitalisation Payments: €5,268 million
  • 2012 – Irish Life Limited: €1,300 million
  • 2012 – Promissory Notes: €25 million

The total amount of these payments comes to €19.7 billion.  Using an assumed interest rate of 4.5% this would imply an annual interest bill of just under €900 million.  There is also interest on the €3.4 billion bond that was issued in March to make this year’s €3.06 billion Promissory Note payment to the IBRC.  This will contribute €140 million to the 2012 interest bill.

It is clear that the Exchequer interest bill from the bank bailout will be around €1,000 in 2012.

Using all of the above figures it can be seen that with additional revenues of around €1,850 and additional expenditures of €1,050 million the Exchequer Balance is probably around €800 million lower than would be the case if the full impact of the banking measures was removed.

2. The NPRF performance update for the six months of the year says:

On 20 February 2012 Bank of Ireland paid a preference share dividend of €188.3m in cash.

On 14 May 2012 Allied Irish Banks paid the preference share dividend of €280m

The NPRF has received €468 million so far this year from the banks (though the AIB dividend was paid in the form of 3,623,969,972 ordinary shares.)  

All told, the effect of the banks is to reduce the 2012 General Government Deficit by around €1.3 billion.    As shown above Ireland run a 2012 general government deficit of €13.6 billion which will be around 8.4% of GDP and below the Excessive Deficit Procedure limit of 8.6% of GDP.

However, if the full impact of the banking-related measures was omitted to calculate an alternative underlying deficit for 2012 the deficit would be €14.9 billion (actual deficit of €13.6 billion less than €1.3 billion gain from the banking-related measures).  This would be  an estimated 9.2% of GDP.

This underlying deficit excluding the impact of the banks means Ireland would be in breach of the 8.6% limit set out under the Excessive Deficit Procedure.  The Council Recommendation says that:

the projected annual deficit path does not incorporate the possible direct effect of potential bank support measures.

It is not specified what this means.  It could be argued that increases in national debt interest and central bank surplus income are indirect effects of the bank support measures (but it is also the case that these roughly offset each other). However, receipts of nearly €800 million of bank guarantee fees and €300 million contingent capital (subordinated bond) interest are surely direct effects of the bank support measures and should be excluded from the EDP calculation.

If that was the case Ireland would not be below the 8.6% of GDP limit set for 2012.

Saturday, October 20, 2012

The Level of National Indebtedness

Writing in today’s Wall Street Journal, Eddie Hobbs has an article under the banner ‘Don’t Expect a Celtic Comeback’.  The overall thrust of the piece is true.  At best, we are at the end of the Celtic Collapse and the future direction of the economy is still uncertain.  Here, though the focus will be on a paragraph early in the article on the level of Irish indebtedness.

The myth of Irish pluck continues today, even amid the financial crisis. Prime Minister Enda Kenny recently graced the cover of Time magazine. But according to data from the International Monetary Fund, Ireland has displaced Japan as the world's most indebted economy. Government, household and nonfinancial company debt add up to 524% of Irish GDP. (The Central Bank of Ireland uses a different basis for calculating the debt of nonfinancial firms; its estimate for total debt would be lower than the IMF's.) Funding this gargantuan load at an average cost of 4.5% would swallow nearly 24% of GDP—in other words, Ireland's entire industrial output.

If the numbers used here were true then the Irish economy would be completely swamped by debt and would not even be treading water.  There is no way that an economy with a GDP of  €161.7 billion in 2012 would be able to carry a debt of €847 billion and an imputed annual interest bill of €39 billion.  As will be shown below the actual figures are around €500 billion and around €16 billion and these figures are determined from data hinted at in the article but then rather inexplicably ignored.

Tuesday, October 9, 2012

IMF Fiscal Multipliers and Ireland

The release of the October 2012 World Economic Outlook by the IMF has attracted some attention.  In particular is a three-page box-out by Blanchard and Leigh on pages 41-43.  A report on this featured on the front-page of today’s Irish Examiner.

IMF: We got effect of austerity wrong

The IMF has admitted it completely underestimated the effects of austerity on the Irish economy and believed the tax increases and spending cuts would not have cost so many jobs.

I had read box-out and glanced through the WEO before I saw today’s papers and I was surprised to see the above reporting of it.  Yes, the findings suggest that the IMF had been applying fiscal multipliers that were too small but this was based on an analysis of 28 countries rather than just Ireland.

From what I can tell the report makes no specific references to any IMF estimates of the “effects of austerity on the Irish economy”.  The finding that the IMF’s fiscal multipliers were too small was based on this graph.

Fiscal Consolidation and Growth Forecast Errors

The horizontal axis is the IMF forecast of the change in the primary structural balance as a percent of GDP for 2010-11. The vertical axis is the error in the IMF’s growth forecast for 2010-11 compared to the actual 2010-11 growth outcomes.  Both forecasts are from April 2010.

It can be seen that Ireland was second only to Greece in being expected to introduce budgetary measures leading to an improvement in the structural balance. 

The trend line shows that when the structural balance was forecast to deteriorate, on average, the IMF tended to underestimate the growth outcome, and that when the structural balance was forecast to improve, on average, the IMF tended to overestimate growth performance.  The implication being that the IMF were understating the effect of fiscal loosening/tightening on economic performance in 2011.  This conclusion is based on the linear regression line shown in the graph.

The box-out reports the IMF forecasters were using fiscal multipliers of 0.5 when multipliers of around 1.0 may have been more appropriate.

And what about Ireland?  The actual data used to generate the graph is here.  For Ireland, the IMF expected fiscal consolidation of 3.2% of GDP and when their 2011 growth forecast was examined they made a growth forecast error of –0.1%, which to all intents and purposes is zero.

Across the 28 countries in the sample, the analysis indicates that the IMF was underestimating the impact of fiscal adjustment.  The sample includes eight countries where there was expected to be fiscal loosening and 20 countries where there was expected to be fiscal tightening.

Of the eight countries with fiscal loosening, seven of them recorded growth surprises above the IMF forecast (only Denmark fell short of its growth forecast) and the growth outcome for five of the countries places them above the trend-line.

Of the 20 countries with fiscal tightening, 16 of them under-performed relative to the IMF’s growth forecasts, though for many of these either or both of the expected fiscal consolidation and growth forecast errors were small as represented by the large grouping in the middle.

The box-out is interesting but it says nothing specific about the IMF’s estimates of “the effects of austerity on the Irish economy”. 

In fact if the IMF had used larger fiscal multipliers for their 2010-11 growth forecast for Ireland the forecast should have been lower.  The IMF forecast in April 2010 was that real growth in Ireland would average 0.2% in 2010-11.  If this was based on the assumed fiscal multiplier of 0.5 then using a multiplier of 1.0 as inferred from the analysis of Blanchard and Leigh the IMF should have made an average growth forecast of around –1.5% for the two years, given the scale of the fiscal adjustment that was anticipated to be introduced in Ireland.  

If this higher fiscal multiplier had been used it would have been the case that Ireland would have significantly over-performed its IMF growth forecast as according to the CSO real growth in 2010 was –0.8% and in 2011 it was +1.4%, for an average of +0.3%. 

The analysis doesn’t tell us anything about the appropriate fiscal multipliers for Ireland now but using the numbers inferred above a re-write of the first paragraph of the Irish Examiner piece might be:

The IMF completely underestimated the effects of austerity on global economies and based on that made growth forecasts for Ireland that were far too high.  The IMF’s growth forecasts for Ireland should have been much lower as it underestimated the cost of tax increases and spending cuts on jobs. However, when the actual economic performance is analysed the impact of austerity in Ireland was not in line with the new IMF forecasts and growth turned out to be significantly higher than revised fiscal multipliers and growth models predicted.

I doubt that verbiage would get on the front page though.

Income (and taxing income) in Ireland

The forthcoming budget will contain a €3.5 billion set of expenditure cuts and tax increases with a rough breakdown of 2:1.  The objective is ensure the general government deficit is below the limit set out under the Excessive Deficit Procedure.  The table below refers to these are targets but the ECOFIN decision clearly states that they are limits which the deficit “does not exceed”.

Budget Adjustments(2)

There has been much debate about the composition of the expenditure cuts and tax increases to be introduced.  Much has focussed on whether the balance is too heavily weighted in favour of expenditure cuts and that more of the necessary burden of closing the deficit be carried by taxation, particularly tax increases on the “rich”.

Let’s assume that the pre-announced reductions to capital expenditure for 2013 of €0.5 billion are persisted with but we look to income tax to achieve the €3.5 billion total required for the budget.  This is unrealistic but as an exercise it should give an insight into what can be achieved.

Back in October 2010, John O’Donoghue set the following PQ for then Minister for Finance, Brian Lenihan:

To ask the Minister for Finance the amount the tax rate for those earning over €100,000 would have to be increased by for the Exchequer to save at least €3 billion.

The answer provided at the time was that the top rate of income tax for those earning over €100,000 would have to be 84%.  Once Universal Social Charge (7%) and PRSI (4%) are included the marginal rate of tax on incomes over €100,000 would have to be 95%. 

For the self-employed it would be 98% because of the 3% USC surcharge on self-employed earnings over €100,000 and for any public sector workers earning over €100,000 the marginal rate would have to be 105% once the 10% public sector pension levy is factored in.

It should be pretty clear that any suggestions that the budget deficit can be closed simply by “taxing the rich” are not realistic.   For reasons unknown it is generally taken that the “rich” are those earning more than €100,000.   However, there are just not enough of these people and they do not earn enough to raise the tax revenue necessary to meet the deficit targets.

Another PQ shows that the Revenue Commissioners estimates there was around 110,000 tax cases with an income over €100,000 in 2011, with 90,000 earning less than €200,000.  Tax cases with incomes over €100,000 had a combined income of €20.2 billion and paid €5.2 billion of Income Tax (PRSI, USC, PS Pension Levy are not included).

Income Tax Distribution 2011

The excess over €100,000 earned by these 110,000 tax cases is €9.1 billion.  To raise an extra €3 billion would require a minimum extra 33% tax to be applied.  In reality it would be higher because 65,000 of these cases are married couples with both earning.  It is not clear how many individual incomes over €100,000 there are.  Revenue reports show that 75% of the couples over the €100,000 threshold earn less then €150,000 so it seems likely that many have these will have combined incomes over €100,000 without necessarily having one income over €100,00.

This is dealt with in this PQ in July 2011 when is was asked:

To ask the Minister for Finance the extra tax that would be raised by increasing the income tax on all taxable income over €100,000 for an individual and €200,000 for a couple by 1%. 

The answer was that it would raise €59 million in a full year.  To raise €3 billion as outlined above would require 51 such raises.  Thus we can update the answer provided by Brian Lenihan from October 2010.  To raise €3 billion from individuals with incomes over €100,000 would require a marginal income tax rate of 92%.  With USC and PRSI all marginal tax rates would be above 100%! 

Anyone with an income over €100,000 would face an increase in their tax bill of an amount greater than the increase in their earnings.  This is not to say that Income Tax should not be increases (it probably should) but there is no money tree out there that we can shake to eliminate the deficit.  Here are some other PQ answers.

There is scope to raise income tax but raising income tax on high earners alone is not enough. Although the figures are slightly dates here is look at who earns more than €100,000

  • PAYE Employees: 31,516 out of 1,515,648 (2.1%)
  • Public Sector Employees: 15,278 out of 414,623 (3.7%)
  • Non-PAYE/Self-Employed: 70,800 out of 437,585 (16.2%)

Almost two-thirds of the high-earners are in the Non-PAYE category so include the self-employed, company directors and the like.  This is also likely to be the group that shows the greatest fluidity.  That is, a person in this category could have a successful year one year and rise in the €100,000+ income category but fall below it the next year.  The make-up of the PAYE and Public Sector Employees in this group is likely to be relatively static but the largest group would be much more fluid.

Finally, it is often stated that those earning more than €100,000 are “rich”.  Income is a flow so technically they are “high-earners”.  Knowing someone’s income does not tell you if they are rich but it can be a good proxy.  Rich is a stock measure of the difference between a person’s assets and liabilities.  Some previous thoughts on wealth (and taxing wealth) in Ireland are here.

Thursday, October 4, 2012

Funding the Exchequer Balance

Yesterday, the NTMA published its Q3 report on the Funding of the Exchequer Balance.  It includes the following table.

Exchequer Funding

At the end of September there was €23.7 billion in the Exchequer Account.   The Exchequer has run a deficit of more than €11 billion in the first nine months of the year but, as can be seen above, has received surplus funding of around €10 billion over and above that required to finance the €11 billion cash deficit.

The source of the €21 billion of funding received by the Exchequer this year has been:

  • EU/IMF Loans: €18.7 billion
  • Long term government bonds: –€0.5 billion
  • Commerical Paper: €2.3 billion
  • National Savings Schemes: €1.3 billion
  • Other Funds: –€0.6 billion

The funding from long-term government bonds is negative because there was a €5.5 billion bond that matured in March of this year and this offsets the €5.0 billion of new funding that was received from the NTMA’s ventures back into the long-term bond markets in July and August. [There was also €3.4 billion bond issued in April to meet this year’s Promissory Note payment but as that negated a cash payment it did not increase funding.]

At €23.7 billion (15% of GDP) it is clear that the Exchequer is sitting on a massive cash buffer.  There are reasons why such a buffer has emerged and is required.  The NTMA made the strategic decision to re-engage with bond markets at a time when bond yields allowed.  We didn’t need the money at the time but the signal of the moves was important. 

There are bond redemptions of €5.6 billion (April 2013) and €7.6 billion (January 2014) and a 2014 Exchequer Deficit to be funded.  Still, one would wonder whether we need a cash pile of €23.7 billion now and it should also be remembered that this offsetting asset exists when gross general government debt figures are quoted.