A CRUCIAL euro zone summit broke up early this morning without any agreement to cut the interest rate on Ireland’s bailout loans after Taoiseach Enda Kenny refused to dilute Ireland’s corporate tax regime.
Mr Kenny came under strong pressure on corporate tax from France and Germany. The Taoiseach met a “tough” reception as he made the case for a substantial reduction in the interest rate on Irish bailout loans.
“It wasn’t possible to reach a deal for Ireland this evening,” Mr Kenny told reporters shortly before 2am.
He said there was acceptance of the principle of an interest rate reduction of 1 percentage point but that he was not prepared to yield any concessions on corporate in return for that.
Diplomats described very sharp “tit-for-tat” exchanges between the Taoiseach and French president Nicolas Sarkozy. They also said German chancellor Angela Merkel expressed scepticism about Mr Kenny’s request. “Corporation tax is now mentioned as a quid pro quo,” said a source from a third-party state.
The source said Mr Sarkozy was quick to question why the Taoiseach was looking for a lower interest rate when it was open to him to raise exchequer revenues by increasing the 12.5 per cent corporate tax rate.
‘‘Sarkozy asked for a gesture on corporate tax. Kenny said I cannot give you a gesture on corporate tax. That led to a whole wider discussion,’’ another diplomat said.
Mr Kenny acknowledged a “good vigorous and vibrant debate” with Mr Sarkozy, but said he would not characterise it as a “Gallic spat”.
German Chancellor Angela Merkel said bailout rates for Greece would be lowered by 100 basis points, and the repayment period is to be extended to 7.5 years.