The peripheral countries of the euro zone will have to pay more than €130 billion this year just to meet the interest payments on mounting debts, a burden almost three times as high as the rest of the euro area.
The figures—calculated by the Financial Times from data published by the International Monetary Fund—underline the deep wounds left by the euro-zone crisis, in spite of the high demand for peripheral euro-zone debt in recent months.
Although falling bond yields have eased borrowing costs markedly during the past two years, weak economic recoveries and still- extensive budget deficits mean that the interest bill is still climbing. But, even if their debt ratios stabilise, and even start to tick down, they will remain extremely high for a long time, which means they’re very vulnerable to any further shocks.
The figures show that the debt-servicing burden of the euro-zone periphery accounts for almost a tenth of the revenue received by governments. In the other thirteen euro-zone countries the same burden averages only 31⁄2 per cent, with the difference in the debt- servicing burden between the indebted periphery and the rest of the zone forecast to rise over the next five years.
In the 2013 budget the Government estimated that expenditure on interest reached €6.3 billion in 2012 and is expected to rise to just over €10 billion by 2015. These numbers are put into perspective when we consider that the total tax take in 2012 was €36.6 billion, with income tax accounting for €15.2 billion.
In other words, interest on the national debt in 2015 is expected to be equivalent to two-thirds of the total income tax take in 2012. This is an unacceptable and unsustainable burden, to which there can only be one answer.
Incidentally, the Irish health budget for 2013 is €13.6 billion.
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