Kenny insists trust in Irish economy being rebuilt in EU

 

Trust in Ireland’s economic reputation is being rebuilt with the country held up as an example to other crisis-hit nations, Taoiseach Enda Kenny said today.

As the two-day summit of European leaders in Brussels closed, Mr Kenny said Ireland would continue talks with the French government and other states over an interest rate cut to bailout loans.

Mr Kenny said he had a “good conversation” with French president Nicolas Sarkozy at the European Council meeting in Brussels, despite suggestions at a previous summit of a frosty relationship and demands for Ireland to raise corporation tax from 12.5 per cent.

“I think the reason that we don‘t have agreement to date is that there was a request for Ireland to increase its corporate tax rate - we aren’t doing that,” the Taoiseach said.

Mr Kenny said it was in everybody’s interests that a new rate would be applied to parts of Ireland’s €85 billion bailout package.

Outside of the crisis in Greece and its second agreed bailout, negotiations at the European Council meeting also focused on countries agreeing to certain tax structures and a reference to the common corporate tax base. “I have given my view on this very clearly - we have a very healthy scepticism on this,” Mr Kenny said.

But he said the Government was willing to discuss the ideas put forward at the summit. “I made the point that were anything untoward to happen in respect of Greece, we want a situation where countries measuring up are protected,” he said. “I made that specific point.”

European Union leaders yesterday promised more money to help Greece stave off looming bankruptcy, provided its parliament enacts an austerity plan finalised in fraught last-minute talks with international lenders.

Mr Kenny said today Greek prime minister George Papandreou was "very forthright" about the challenges that Greece was confronting and Athens was "going to face these challenges head on."

Banks and European governments moved closer to a deal today to help Athens secure funds ahead of a parliamentary vote on austerity next week that Mr Papandreou must win to avert default.

Despite a refusal by the conservative opposition to back the plan agreed with international lenders and signs of revolt in his own socialist party, Mr Papandreou said he was confident the deeply unpopular package of spending cuts, tax hikes and privatisations would pass.

"It is a moment of historic importance. If everybody resists, worse things will come, perhaps even bankruptcy," Mr Papandreou told a news conference at the sidelines of a summit of European Union leaders in Brussels.

The meeting saw euro zone governments discuss a new bailout package for Greece, which could include up to €30 billion from the private sector to help cut Greece's huge public debt.

President Nicolas Sarkozy said French banks had agreed to participate in a voluntary rollover of Greek debt, Spain's Jose Luis Rodriguez Zapatero said Spanish banks were willing to take part in a scheme to buy Athens more time while Berlin has asked German banks to state their intentions next week.

"We have had many meetings with the banks and insurance companies. There is no difficulty," Mr Sarkozy told reporters after the meeting.

However, no new money will flow unless the Greek government enacts deep cuts and markets remain sceptical. The euro fell sharply on doubts the government will win the day after a maverick ruling party member said he would vote against.

"It's very ugly; a complete mess," said a trader in London. "There's a rumour the austerity won't pass."

After a difficult series of meetings this week, new Greek finance minister Evangelos Venizelos thrashed out an agreement with inspectors from the EU and the International Monetary Fund yesterday to release the funds Greece needs immediately. But if the vote next week is lost, international lenders are unlikely to release a €12 billion funding tranche, meaning the government will run out of cash within days.

Greece accepted a package of €110 billion of EU-IMF loans in May last year but now needs a second bailout of a similar size to meet its financial obligations until the end of 2014, when it hopes to return to capital markets for funding.

International lenders want binding commitments that Athens will push through the tough measures judged necessary to get its shattered public finances back in order.

The government won a vote of confidence this week with 155 out of 300 votes in parliament, showing how tight next week’s vote on its austerity package could be.

Daily protests continue in Athens and other cities and an opinion poll today showed three quarters of Greeks oppose the raft of tax hikes and spending cuts that will hit them hard.

This morning, EU leaders formally appointed Italy's Mario Draghi as the next president of the European Central Bank to replace Jean-Claude Trichet. Mr Draghi (63) will take over as president on November 1st.