After a heated Bundestag debate, Germany voted yesterday to back Ireland’s request to restructure crisis-era loans and save the exchequer an estimated €150 million.
The request from Dublin turned into a proxy battle between Germany’s two leading parties, which are locked in a growing coalition battle.
Angela Merkel’s Christian Democratic Union (CDU) backed Ireland’s request, along with the Greens and the liberal Free Democratic Party (FDP), calling Ireland a model crisis country.
But the centre-left Social Democratic Party (SPD) voted against, calling on Dublin to adopt a “fairer tax policy” that prioritised its EU partners over multinationals.
In turn, the SPD’s critical stance saw Bundestag rivals accuse it of “playing politics” over Ireland – and EU rescue policies the party had backed in the past.
The heated debate ended with disagreement over the show-of-hands vote, prompting a full lobby vote that saw the motion passed by 348 to 283.
Dublin has applied to refinance an IMF loan, as well as two bilateral loans from Denmark and Sweden, using funds borrowed at lower rates from financial markets.
As Ireland has also borrowed €40.2 billion from two EU bailout facilities, all European Union states must agree to waive the right to get early repayment at the same time.
The Bundestag is one of a handful of European parliaments whose permission is required to change Ireland’s crisis-loan terms and allow early repayment. Elsewhere, the decision is made by government.
Acting finance minister Peter Altmaier told the German parliament that Ireland had fulfilled all conditions of its EU/IMF programme and was part of a rescue "success story" that included Spain and Portugal.
Ireland had restructured its banks and welfare system, won back trust of financial markets and was back in growth, he said, proving EU crisis measures had been appropriate.
Backing Dublin’s request and reducing the Irish debt burden, he said, would increase further market trust in “this small but important country”, and was thus in the interest of Irish and German taxpayers.
“I welcome today that I spoke with the Irish finance minister and he is ready to continue the technical co-operation and oversight with the IMF,” added Mr Altmaier. “This is in the interest of Ireland and will increase credibility in Irish politics.”
SPD parliamentary secretary Carsten Schneider attacked Ireland's request, given its refusal to collect from Apple €13 billion in tax the European Commission says is outstanding.
“If a liberally minded country relinquishes tax revenues … then, for us in the SPD, our solidarity is at an end,” he said. “Tax dumping cannot be a business model in a social and progressive EU … it is poison for democracy.”
Mr Schneider suggested that Ireland had failed to honour two crisis-era promises to revisit its tax model and had “run the stop sign twice”.
Not everyone in Dr Merkel's CDU had warm words for Ireland, with MP Hans Michelbach conceding that Ireland was a "tax haven and accessory for tax tricks of transnational concerns".
“This is not acceptable,” he said. But, turning to Mr Schneider, he added: “You cannot use a mallet against another European country … and mix loan repayments with tax policy.”