Gros, Daniel.<\/p>\n
Ireland retains its full taxing powers, which will allow it to service its debts.<\/p>\n
Is Ireland broke? Short answer: no. Long answer: The Government should be able to service its large debt because the external debt of Ireland is rather low, about 20 per cent of GDP.<\/p>\n
The net external debt of Ireland can be measured easily by summing past current account balances. Since the country has run a surplus for many years, the sum of the current account balances over the last 20 years amounts only to about minus \u20ac30 billion, about 20 per cent of the Republic\u2019s GDP of \u20ac150 billion.<\/p>\n
Greece and Portugal, by contrast, have foreign debt which, at about 100 per cent of GDP, is four times higher than Ireland\u2019s.<\/p>\n
Why is foreign indebtedness more important than public debt \u2013 which is much higher now in Ireland than in Portugal?<\/p>\n
The reason is that EU states retain their full taxing powers. This has a simple corollary if one takes a country with a high public debt but no external debt.<\/p>\n