No bailout rate cut for 'time being'

 

The Government does not expect a reduction in Ireland’s interest rate on the EU/IMF to be agreed at next week’s meeting of EU finance ministers, Minister for European Affairs Lucinda Creighton said today.

Ms Creighton said difficulties over the size of Greece’s debt had complicated the issue of Ireland’s interest rate and it was now unlikely agreement will be reached next week.

“The likelihood is that the focus on Greece will take the Irish interest rate off the agenda for the time being,” she said.

Speaking in Paris, Ms Creighton said that the issue had become more complicated than the Government would have hoped because of the situation in Greece.

“The Greek situation is making other member states more uncomfortable because they are beginning to question how much it is going to require and there is concern about that,” she said.

The Minister was speaking after an hour-long meeting with her French counterpart Laurent Wauquiez at the French Department of Foreign and EU Affairs.

Ms Creighton told Reuters that raising the 12.5 per cent corporation tax rate was out of the question.

"To take away one of the really essential pillars of our economic policy, which is critical to achieving growth, would be absolutely counter-productive, not only for Ireland but also for the euro zone and the European Union," she said.

European economic and monetary affairs commissioner Olli Rehn said yesterday he expected an agreement "very shortly" to lower the rate charged to Ireland by the European Financial Stability Facility, to improve its debt sustainability.

French president Nicolas Sarkozy has accused Ireland of "fiscal dumping" by using its low headline corporate tax rate to lure foreign investment away from other European countries, even as it sought their aid with its acute debt crisis.

French politicians of both right and left ask why their taxpayers should lend money at a concessionary rate to a country with a higher average income per capita than the French if it is unwilling to raise more revenue from multinational corporations.

However, Ms Creighton said the French government and media had a "largely inaccurate preconception about Ireland's tax model".

Irish officials note that while France's headline corporate tax rate is 34 per cent, the real effective rate paid by business is far lower and some corporations, such as oil major Total, manage to pay no French corporate tax at all.

Asked whether Ireland was prepared to make an alternative concession to France and Germany, Ms Creighton was non-committal on accepting a common corporate tax base in the euro zone. Ireland had reservations about a European Commission proposal on the issue and could not say where it would stand in two years' time.

She said Ireland's strict compliance with the bailout programme, praised by a EU/IMF inspection team last month, was in itself "another sort of quid pro quo from Ireland for this interest rate reduction".