ANALYSIS:TAOISEACH ENDA Kenny bore no bruises as he emerged from a testing encounter with Angela Merkel and Nicolas Sarkozy shortly before 2am on Saturday.
If Mr Kenny was weary after 13 hours of talks on Libya and the euro crisis at his first summit meeting in Brussels, he did not show it. He exchanged cross words on corporate tax with the French president and ran into a German brick wall on the bailout interest. But he was as affable as ever at the end of it all. “In respect of a good, vigorous and vibrant discussion that I had with the French president – I’m not sure whether you’d call it a Gallic spat or not – obviously the French president has very clear views about the corporation tax rate for quite a long time but then so have I,” he said.
“The question that was being asked of me was to make references to our corporate tax rate. I made it perfectly clear on many occasions that this was not something that I would contemplate and didn’t this evening.” Two things are now clear. First, euro zone leaders have agreed on the principle of a rate cut. That they are willing to yield a 1 percentage point cut from the 3 per cent “surcharge” on Irish loans is significant, even if Mr Kenny asked for more. This offers a measure of relief.
The second point does not. Ireland’s partners have named their price for such a rate cut and it is a price Mr Kenny will not pay. This led to stalemate. Difficult talks lie ahead in the run-up to the next summit meeting on Thursday week, at which EU leaders want to finally agree on the overhaul of their bailout fund.
Whether the circle can be squared without a deeply damaging U-turn on either side seems unlikely. Only days in office, it appears politically impossible for Mr Kenny to concede the tax increase Mr Sarkozy is seeking. Still, euro zone leaders conceded a key point. While loans from the bailout fund currently come at a penal price, they resolved that IMF pricing policies will in future apply. Ireland pays almost 6 per cent now, but the current IMF headline rate is around 4 per cent.
Debate now turns to the banks. As stress tests continue, the Government fears it will be put in an impossible fiscal position if significant new capital is required.
It appears likely, however, that the Taoiseach will be asking for yet more European solidarity at the next summit. It’s a big ask.
