Questioning Noonan | On the analysis and evidence behind the 60% debt to GDP target

Stephen asked the Minister for Finance:

further to Parliamentary Question No. 202 of 2 May 2012 (see here), if he will provide the detail backing up the decision to apply a debt to GDP ratio of 60% for example, economic papers, quantitative analysis, empirical evidence; and if he will make a statement on the matter.

Ref No: 23481/12

Minister for Finance ( Mr Noonan) : 

As I stated in my previous reply the decision to apply the debt-to-GDP ratio of 60% in the Intergovernmental Treaty is to ensure consistency with the debt provision of the Stability and Growth Pact.  Indeed, the 60% debt reference value has been around for some time.

The debt and deficit limits contained in the Pact are designed to prevent spill-over effects from fiscal policies in participating Member States.

Furthermore there is ample empirical evidence to confirm that relatively high levels of public debt can constrain economic activity through, for instance, crowding out of private sector investment and reducing confidence.