Brussels, 12/03/2011 (Agence Europe) - After lengthy discussion on Saturday morning 12 March, leaders of the euro area countries refused to grant an immediate cut in interest rates paid by Ireland on European bail out loans. They decided to strengthen the two instruments at their disposal to safeguard financial stability in the euro area and to make a gesture towards Greece, by cutting the rate of interest on European loans to Athens as part of the bail-out plan from 5.2% on average to 4.2%, and by extending the time allowed to Greece for repayment (see related articles in today's issue).
The case of Ireland, to which international financial aid of €67.5 billion was granted, was the subject of particularly heated discussion. Germany and France called on this member state to increase its corporate tax rate, currently fixed at 12.5%, if it wants to enjoy better conditions for the loans consented. The new prime minister of Ireland, Enda Kenny, refused point blank, as the previous government had done. He said it was not possible to reach an agreement for Ireland that evening, and hoped intense discussion would continue over coming weeks. He promised to fight “for weeks” to defend the Irish corporate tax rate. Before end March, Enda Kenny will meet ECB President Jean-Claude Trichet.
When asked why Ireland had not received its requested cut in interest rates, Van Rompuy said that Dublin had not fulfilled all the conditions set. Without specifying what these conditions were, he hoped the situation would be only temporary, he said. At the end of March, the European Council will look at the question again.
“It is difficult to ask other countries to help when Ireland plans to keep the lowest corporate tax rate in Europe”, Nicolas Sarkozy asserted, although he does not intend to call on Dublin to impose a corporate tax base that is comparable with that of the other member states. “It has been envisaged that Ireland should be asked to make a gesture, and, at this time as I speak to you, our wish has not been fulfilled”, he added. France, Germany, Spain, Greece and Portugal hold views along the same lines when it comes to tax issues. Enda Kenny said the French president has had clear ideas about the subject of corporate tax for some time - but then, he said, so had he.
German Chancellor Angela Merkel said they were not really pleased with what Ireland had to propose and that is why the interest rate cut on aid granted was only granted to Greece. (M.B./L.C./transl.jl)