US headlines true to type as bailout makes a splash

NET RESULTS:Ireland's pains occupied US interest just long enough to be digested with Thanksgiving fare, writes KARLIN LILLINGTON

THE WEEK the IMF came to town was a strange one to spend outside of Ireland, seeing at first hand how the rest of the world viewed the slow crash and burn of the IMF bailout and pending Government collapse.

This somewhat surreal spectator event began in the lounge at Chicago’s O’Hare airport a week ago Monday, where a delayed connecting flight from Ireland to San Francisco meant watching CNN cycle through footage of the arrival of the IMF. Ouch.

Flight connections duly made, I found that the subject was also high on the news agenda in Silicon Valley, with the negotiations toward a bailout making front-page news, and the top leader in the San Francisco Chronicle on Tuesday morning.

Granted, it was Thanksgiving week in the US and domestic news was thin on the ground, but for a newspaper half way around the world to commit its top opinion piece to Ireland, headlined “Irish Eyes Aren’t Smiling”, was, in any event, extraordinary.

Noting that the Celtic tiger “is anything but roaring now”, the piece went on to state, in humbling terms for any Irish reader, that big-time lending from Irish banks “fueled a surge that brought a middling, backward economy to the forefront of Europe’s growth”. Ouch again. How easy it has been to forget that past.

The next sentence, however, is interesting, coming from a main Silicon Valley newspaper: “The easy loans, aided by a tech-savvy workforce and low taxes, brought a Google-and-Intel image to the island.”

Set aside the “easy loans” and I think IDA Ireland and Enterprise Ireland would be happy enough to see that sentence in a Chronicle editorial.

The overall thrust of the piece was that the boom is ending in tears, with wider implications for the EU and other potential “weakling economies” that might “line up next for a humiliating hug from the big brothers” in the EU.

Perhaps more concerning was that the business sections of both Valley newspapers, the Chronicle and the San Jose Mercury News, carried a brief Bloomberg wire story the same day, quoting HP Ireland boss Lionel Alexander – who is also current president of the American Chamber of Commerce in Ireland – sabre-rattling about the 12.5 per cent corporate tax rate.

HP, the story in both papers said, might reconsider its Irish operations if the tax were to be altered.

“HP is very clear,” Alexander was quoted as saying. ”If the tax rate increased, we would be re-looking at our investment in Ireland.”

The comment is disappointing and ill-considered from the head of the chamber in Ireland. Yes, the tax rate is obviously important to an American multinational but seriously, a change in the tax rate would cause them immediately to reconsider their Irish operations?

And here I have been listening for years to the same company being “clear” in stating that tax rate alone is not the main reason for it (and many others) to be in Ireland. Otherwise surely they’d have just moved all those operations to Switzerland or Singapore with with an effective tax rate of zero?

By the next day, the Mercury News carried a follow-on piece in which the heads of the Irish Cisco and GE operations made a more considered response, carefully emphasising that while they had serious concerns about any change to the 12.5 per cent corporate tax regime, tax rates on their own were not why those companies had Irish operations.

But damage was likely to have already been done by HP’s comments.

The company is one of the Valley’s most important and historically significant companies and any pronouncement threatening a pull-out was always going to get more attention than it realistically deserves (with HP paying about three times as much corporate tax in the US, the Irish tax rate would have to spike quite a bit to not remain comparatively attractive).

Another Irish pronouncement that week – which was perhaps seen differently than intended – in the Valley was the Green defection from Government.

Whatever the party’s reasons and whatever the intentions, in the US the move was read only as a situation where the Government had collapsed following the arrival of the IMF. Not a particularly strong national image to send around the world.

By the end of the week, though, the focus of stories had begin to change away from Ireland and over to the EU’s broader financial woes and whether Spain and Portugal might be next in line for a bailout.

It was hard to know whether to feel insulted or relieved that Ireland’s pains occupied American interest just long enough to be digested with the turkey and the pumpkin pie. On the other hand, the shift in attention meant a visitor no longer had to hear the ghastly sums involved in the bailout repeated on yet another news broadcast.

And that was definitely something to be thankful for.