As a philosophy, live now and pay later by borrowing large sums of money is not necessarily foolhardy if the loan is for productive purposes where the return will exceed the cost of repayments.

For businessmen or governments, the strategy of buying money in order to get richer is no different. If you are prudent, hardworking and maybe a little lucky, your investments will more than pay your loan costs, leaving you with a generous profit.

Otherwise, you can find yourself, like many Third World countries, with a debt which, if not carefully managed, could result in bankruptcy.

For centuries, governments have borrowed money: from their own citizens, which is called internal debt, or from overseas sources - external debt - and for a variety of purposes including developing armies.

Apart from a country's own taxpayers, international banks and investment houses will lend money, often through purchase of government bonds - a kind of IOU issued by national governments.

The "national debt" includes a government's internal and external debt - in other words what is owing inside and outside the state - and managing that debt forms an important part of economic policy.

Since economic and monetary union this January, the State's currency has become part of the euro. This means that the Irish debt is now expressed in euros.

Ms Anne Counihan is a lawyer and a director of the National Treasury Management Agency or NTMA. This agency has looked after the State's debt since 1990, taking over the function from the Department of Finance.

"It was established to manage the debt in a fashion that would generate a reduction in the annual cost of servicing the debt. This is achieved through re-financing, closing down expensive borrowings and replacing it with new borrowing at a cheaper rate," she says.

Now, 94 per cent of the £29.5 billion debt is expressed in euros. Most of the remainder is in sterling, which is outside the "euro zone".

"Almost £30 billion is a very substantial amount of money for a country of our size. It should not be forgotten that that is an enormous portfolio of debt," Ms Counihan says. She formerly worked in London for Manufacturers Hanover, an investment bank, and is involved on the agency's legal side, documenting the transactions, the bond issues, and the day-to-day contracts.

She also has a role in managing savings certificates, savings bonds, prize bonds, and Post Office Savings Bank deposits - all of which involve Irish savers lending money to the Government.

"That represents one of the most stable components of the national debt, principally because personal savers tend to stay with the investment," she says.

The NTMA has a staff of 60 engaged in various financial transactions, including foreign exchange transactions, which minimise the cost of servicing the debt. It is also now competing for funds against other richer euro zone borrowers, such as Germany and France.

"We only represent 1 per cent of the euro zone market and therefore we must be sure that we have Irish Government bond issues structured in a way that makes them attractive to investors," Ms Counihan says.

The NTMA is now being cited as a model for other countries such as Britain, Portugal and Iceland, which realise their own national debts could be managed more effectively.

The NTMA's creation has coincided with the State's economic growth and debt reduction. But the ghost of the late 1970s and early 1980s when the national debt was a household phrase continues to haunt today's financial planners.

The unexpected £747 million surplus which the Minister for Finance, Mr McCreevy, found in his possession at the end of last year was promptly turned over to reduce the national debt ahead of many other willing takers.

At that time, the debt amounted to £28.3 billion, down from £30.69 billion over the previous 12 months. National debt is calculated as a proportion of Gross Domestic Product - that is all the wealth produced within the State in a given year. There was an eight percentage points fall in the Government debt/ GDP ratio, from 71 per cent at the end of 1996 to 63 per cent at the end of 1997.

The last annual report stated that as a result of the substantial decline in debt/GDP ratio in recent years, the State's ranking relative to other EU countries had continued to improve. Indebtedness has fallen from 148 per cent of the EU average at the end 1992 to an estimated 88 per cent at the end of 1997. In other words, it has fallen below the EU average.

Ireland now has the third lowest level of indebtedness among the 15 EU member-states, according to Ms Counihan. Despite the Celtic Tiger, the State nearly found itself in the unenviable position of going bankrupt during the late 1970s, early 1980s when borrowing rose enormously and interest payments consumed ever greater proportions of debt repayments. During the worst moments, the government behaved like the classic chronic borrower, getting fresh loans to repay the interest on older loans and raising tax rates on its unfortunate citizens. According to the historian, Prof J J Lee, most borrowing went towards non-investment purposes, paying for wage increases in the public sector.

It probably contributed to the runaway unemployment which marked that period, although "the main excuse for the borrowing splurge was that it would reduce unemployment". Interest charges - making up most of the cost of servicing the debt - now amount to about £2.5 billion annually, or 13 per cent of total tax revenue, down from 27 per cent in 1990. As a lesson, it will be long remembered.