Unit 3 Our Economy Irish Government budget surpluses and defi cits as a % of GDP
10 5 0
-5
-10 -15 -20 -25 -30 -35
1975-95: Governments ran regular budget defi cits and had to borrow money.
1996-2005: Governments ran a small surplus and used the surplus to begin to pay off the earlier debts.
2006 onwards: Governments experienced very large defi cits due to a collapse in tax revenues caused by an economic recession and increased spending to rescue the banking system from collapse. The defi cit was so big that the government had to be ‘bailed out’ using emergency loans from the EU and the International Monetary Fund (IMF). These loans now have to be repaid with interest. National debt refers to the total amount of money which a country’s government owes in borrowings.
National Debt Effects Effect on individuals
If national debt rises
n People pay more in taxes to the government.
n Some public services become unaffordable and have to be cut back or eliminated.
Effect on the economy
n Less money is available to pay for public services.
n If national debt grows too big, governments may have to make very large cuts to public spending. This can increase unemployment and reduce economic growth.
If national debt falls
n Lower taxes may be possible if the national debt burden falls to a low level.
n More public services may be available.
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n More money may be available to pay for public services and government investment in the economy.
