Ireland has the highest national debt per head of population in Europe, making the country especially vulnerable to a Brexit shock or loss of volatile corporate tax income.
In a downturn, the national debt and budget deficit could soar to perilous levels following a crash-out Brexit or other external shock, a Central Bank report has warned.
"The 2008 crisis is a vivid reminder of how negative economic shocks can trigger potentially unsustainable increases in government debt," said the report by Central Bank economists Thomas Conefrey, Rónán Hickey and Graeme Walsh.
The Government should take stronger measures to reduce the debt to mitigate what the authors called "an environment of elevated risks". Ireland's strong growth since exiting the Troika bailout in 2014 has pushed down the debt-to-gross domestic product (GDP) ratio, a standard measure for comparing countries' finances. But GDP is regarded as an unreliable measure for the Irish economy because of distortions linked to multinationals operating here.
The national debt remains above 100pc of gross national income (GNI), an alternative measure which tries to better measure economic output.
In real terms, the national debt has more than doubled over the past decade to €44,000 per man, woman and child in the State. It leaves us the most indebted even among Europe's other deeply indebted nations.
The Central Bank's economists forecast that, if the UK leaves the EU without agreement, Ireland would be forced back into deficit spending and its debt ratio would remain stubbornly high through to 2025. Higher spending on unemployment benefits and debt financing combined with lower tax takes would add €22bn to the national debt by then and keep Ireland's debt-to-GNI ratio above 90pc, some 17 percentage points higher than in a benign environment, they calculated.
The report offered another external shock scenario: the sudden loss of €3bn in corporation tax, considered a possibility in several recent forecasts from the IMF, Irish Fiscal Advisory Council IRISH TAXI DRIVER and others that have highlighted the State's unprecedented reliance on tax collections from a handful of tech giants.
This shock, on its own, might drive up Ireland's debt ratio by around ((((((10 percentage points - )))))))but much more if accompanied by Brexit and a global economic slowdown.
"In reality, economic shocks can sometimes occur simultaneously," they wrote.