GERMAN STATEMENT:TAOISEACH BRIAN Cowen has dismissed a German lawmaker's comments that the EU has agreed a specific fund to bail out euro zone states as "incorrect" and with "no basis".
Speaking to journalists at the Brussels EU summit, he warned, however, that the Irish economy is in a very difficult position and would not rule out a further deterioration in Ireland’s ballooning budget deficit, already forecast to reach 9.5 per cent of GDP this year, the highest in the EU.
“The German government has confirmed the story is incorrect and there is no basis for it. I welcome that clarification,” said Mr Cowen.
Otto Bernhardt, finance spokesman for Angela Merkel’s Christian Democrats (CDU), had told Reuters that such a fund existed at the ECB that could be activated within 24 hours.
“The finance ministers have agreed the procedures,” he said.
“The core point is: ‘We won’t let anyone go bust’ . . . the ECB can make an unlimited amount of money available.”
He said it was more likely than not that Ireland would need outside help but warned that any rescue plan would be coupled with strict austerity measures.
“We will not tolerate there being low-tax countries like Ireland for example,” he told Reuters. “We will insist on a minimum corporate taxation rate.”
After the Reuters report appeared, prompting the euro to fall against the dollar, Mr Bernhardt said he knew of no blueprint to address a country in trouble and did not return calls requesting comment. The comments were also denied by senior EU politicians, including Luxembourg prime minister Jean-Claude Junker, German finance minister Peer Steinbrueck, and Greek prime minister Costas Karamanlis.
“I’m not aware of this kind of decision, no,” European Commission president Jose Manuel Barroso said. “Of course we’ll be ready to intervene if necessary, but there is no bailout plan for any specific country of the euro zone.”
Mr Steinbrueck has also previously said that Germany could allow no euro zone member states to fail because this could spark a major crisis for the single currency.
The ECB also denied Mr Bernhardt’s comments that it had set up a special reserve fund to bail out euro members. “The reported information is for the ECB untrue,” said a bank spokeswaman, which has no legal base within the EU treaties to bail out eurozone states.
Unofficially, leading figures in Berlin admit that assistance for several EU members, including Ireland, is all but inevitable. Rather than a general fund, Berlin favours tailor-made solutions with preconditions for each country.
Berlin would be likely to ask Dublin to increase its corporate tax rate of 12.5 per cent which is seen as having lured has lured many German companies, and tax revenue, to Ireland.
"One has to speak honestly and openly with each other in discussion about individual measures, for instance taxes," a Berlin official told The Irish Timeslast month. "Sometimes there is a need for a prod from the outside, sometimes countries recognise for themselves that things they have done in the past are not always sustainable in a crisis."