Merkel says Germany may come to Ireland's aid

 

GERMAN CHANCELLOR Angela Merkel has said Germany will consider assisting Ireland and other euro-zone members in financial difficulty, but only if they lay plain the true state of their banks’ finances at Sunday’s EU summit.

German officials suggested yesterday that help for Ireland could be conditional on changes to its corporate tax regime, long a thorn in Berlin’s side.

In an unprompted reference to Ireland in the course of an address yesterday, Dr Merkel gave the strongest signal yet that Berlin may act under Article 100 of the Maastricht Treaty, allowing financial assistance to be given to countries experiencing “difficulties caused by natural disasters or exceptional occurrences beyond its control”.

“Of course there is a certain interpretative room to manoeuvre in the stability and growth pact and a country like Ireland that has been hit quite hard by the banking crisis is clearly in a different situation to a country like Slovakia with fewer banks and where the distorting forces at work are weaker,” said Dr Merkel to the foreign press in Berlin. “We have shown solidarity and that will remain so. We should use Sunday’s summit for member states affected to give an honest report of their situation.

“We will have to discuss the situation in each individual country. It all depends on whether we are able to speak openly and honestly about the situation because there are a lot of rumours flying around.”

The German leader said the growing divergence among euro-zone members in the cost of financing their debt was a “difficult” situation that required joint remedial action.

But after striving to balance its own budget in recent years, Berlin is wary of a one-size-fits-all solution. It also has no interest in rushing to assist countries it views as having shown weaker fiscal discipline in recent years.

Dr Merkel declined to go into details on any assistance, saying only that strict and long-term budget discipline would be a prerequisite. German officials admit assistance for several EU members, including Ireland, is all but inevitable. They are now “brainstorming” possible options and are considering making individual preconditions for each aid recipient.

One request could be for Ireland to increase its corporate tax rate of 12 per cent, which has lured to Dublin many leading German companies – and their tax revenue.

“One has to speak honestly and openly with each other in discussion about individual measures, for instance taxes,” said a Berlin official who asked for anonymity.

“Sometimes there is a need for a prod from the outside. Sometimes countries recognise from themselves that things they have done in the past are not always sustainable in a crisis.”

The president of Germany’s Bundesbank, Axel Weber, has said “targeted aid for individual member states” may be “unavoidable”.

“This would have to be tied to strict demands and conditions,” he told Die Welt newspaper.