Ireland's economy 'in rude health'
GERMAN EXPERT:GERMANY’S MOST influential economist has said the Irish economy is “in rude health” and the incoming government should increase income taxes before demanding a cut in interest rates on Ireland’s EU-IMF loans.
Prof Hans-Werner Sinn, head of Munich’s Ifo economic institute, insisted yesterday that Ireland doesn’t need any EU bailout because there was “huge room to manoeuvre” on tax.
“The German tax ratio is 40 per cent and the Irish is 29 per cent, 11 percentage points lie in between,” he said. “If you take just three points from the 11 you still have a huge difference to Germany and would have all the money you need.”
He said the Irish desire to renegotiate an interest rate cut was understandable, but that it should not be considered “if Ireland isn’t prepared to increase its taxes”.
“Ireland is a country in rude health, in no way comparable to Greece and I cannot understand any of these insolvency stories, there’s no reason to place Ireland under the rescue shield,” said Prof Sinn, head of the Ifo institute which is behind Germany’s closely watched monthly business confidence index.
Speaking at the Berlin presentation of a euro zone report by seven European economists, he said the situation of Greece continued to be of concern.
“It has to be made possible to leave the euro – either temporarily or permanently – without leaving the EU itself,” said Prof Sinn.
German finance minister Wolfgang Schäuble has described the possible exit of Greece from the euro zone as “not a taboo . . . but wrong”.
In a new departure, the German finance minister said it would be “catastrophic” for the German economy if Greece returned to its drachma currency as it would strengthen the euro, damping German exports. Temporary exits from the euro would mean the “the beginning of the end” of the single currency, he said.
Prof Sinn said Germany had benefited from the crisis, with anxious investors pumping their money into the domestic economy. “The world is made up of winners and losers and Germany is a winner after this crisis,” he said.