Peter Connell: Encouraging news from AIB. In its Economic Outlook for 2010 published last month the bank agrees with many of those writing on PE on the issue of Ireland’s sovereign debt.The report points out that ‘Ireland has one of the lowest debt ratios in the EU: 51% at the end of 2009, allowing for cash balances’ – which it states amounts to €22 billion (slide 12 in the presentation linked above). Like many on this blog, the bank argues that this relatively positive picture provides the State with options regarding investment and public spending.
Virtually all mainstream commentators argue that there is no alternative to fiscal consolidation, so this is important information as it is emanating from an unexpected source and certainly one not naturally sympathetic to the kind of analysis you’ll read on this blog. But, it’s there in black and white. AIB says it’s OK for the State to increase public spending. Let me see, how exactly does the report put it? Ah yes, ‘low public debt gives the State the capacity to support the banking sector’ (see slide 12)….