Waigel casts eye on Ireland's EU funds

The German Finance Minister, Mr Theo Waigel, yesterday hinted that he has his eye on some of Ireland's EU cash to help pay for a German budget rebate.

In a speech to fellow EU Finance Ministers on the Austrian presidency's programme, Mr Waigel reiterated his call for a reduction in German net contributions and went on to warn that there "are clear signs of overheating in countries which are net recipients of EU funds". But the Minister for Finance, Mr McCreevy, said an earlier discussion at the second meeting of the new Euro-11 group on the economic context of next year's budgets had seen Ireland's performance "graded in the honours category". Forecasts produced by the Commission for the Euro-11 showed it expected only Ireland, the Netherlands and Finland to cut structural, or cyclically adjusted borrowing needs in 1999. The President of the Commission, Mr Jacques Santer, expressed concern at the problem, warning that "all too often it just happens to be that you have a good budget deficit because of the economic situation that prevails. We have to try to ensure that the deficit is kept structurally under control," he said.

Mr McCreevy said, however, that ministers had avoided detailed discussions of individual member states' budgets for next year - that discussion is yet to come.

Nevertheless, he was reassured by comments to the Euro-11 group from the president of the European Central Bank, Mr Wim Duisenberg, in which he pledged the interest rate policy of the ECB would be based on the totality of the interests of member states - it is, however, a formulation taken by some to mean precisely the opposite to Mr McCreevy's interpretation that the ECB would be sensitive to Irish needs. The Austrian Presidency was warned off attempting to promote tax harmonisation by Mr McCreevy. Vienna sees the issue as a priority for its presidency, but Mr McCreevy, pointed out that, while co-ordination is referred to in declarations of ministers and heads of government, nowhere would anyone find a reference to harmonisation. Ireland is not alone in resisting all talk of harmonisation, although it may well face criticism when a peer review group on unfair tax competition begins its examination of the Irish corporation tax system later this month.

The meetings also saw splits over Commission proposals to bring in a minimum 20 per cent withholding tax on savings in a bid to crack down on tax evasion.

The Luxembourg Prime Minister, Mr Jean-Claude Juncker, made it clear he had objections to some parts of the proposal, while the Belgian Finance Minister, Mr Jean-Jacques Viseur, said the proposal was indispensable.