TAOISEACH ENDA Kenny said yesterday that Germany sees the need to ensure Ireland’s “successful and timely” return to financial markets.
Talks held in Berlin dealt with Ireland’s preparations for the rotating presidency of the EU next January. However, German politicians raised the question of concessions on Ireland’s low corporate tax rate as a possible part of a final agreement on Ireland’s banking debt problems.
After “excellent and extensive” talks, Mr Kenny said Chancellor Angela Merkel reiterated that she saw Ireland as a “special case” in the crisis and that she would help expedite at European level a relief deal on Irish debt to reflect this.
“I very much welcome the chancellor’s support to ensure successful completion of the programme and to realise sustainable re-entry to markets. Dealing with Ireland’s banking and sovereign debt process is a key challenge for us,” said Mr Kenny.
“I explained to the chancellor the need for progress in this process and you, Chancellor, agreed with me that the more clarity we can provide on how Ireland can ensure a successful entry, the more successful this will be.”
As the two leaders held lunch talks, senior figures in Dr Merkel’s ruling Christian Democrats (CDU) said assistance for Ireland would have to be framed to avoid setting a precedent for others.
Deputy CDU Bundestag leader Michael Meister said there was also “an interest in Germany that decisions on locating companies are not just made on a basis of taxes”.
“There are many companies that, purely for tax reasons, find Ireland attractive, which leads to a difficult competition situation in the European Union,” he said.
Adding that it was not up to Germany to lecture another member state on its tax affairs, Mr Meister said: “This is a debate we need to have in the entire euro area.”
Ireland’s 12.5 per cent corporate tax rate is a sore point in Germany; many politicians see it as an unfair tool used to attract investment from banks, many of which later required bailouts.
Social Democrat (SPD) budgetary spokesman Carsten Schneider said his party was opposed to any further European assistance involving direct bank recapitalisations by the ESM bailout fund.
“European taxpayers have already carried the burden for the financial industry and cannot accept further burdens,” he said.
Party officials added that “all further assistance will bring back on to the table the issue of corporate tax”.
The SPD’s traditional coalition partner, the Green Party, said internal discussions on European bank recapitalisations had “seen Ireland’s corporate tax question play a role”.
Over at the opposition Left Party, deputy Bundestag leader Sahra Wagenknecht urged Dublin to adopt a more daring debt solution.
“Some of the debt arising from the bank rescue should be declared illegitimate … and a haircut imposed Europe-wide,” she said.
Ireland’s upcoming European presidency would push job creation and economic stability, Mr Kenny said, the latter by “making the best use of the tools that we have” – underlining Irish opposition to a German wish for European treaty change.
Divisions emerged two weeks ago when Dr Merkel appeared to rule out retrospective European assistance on so-called legacy bank debt. Two days later, a joint statement emphasised Ireland’s banking and sovereign crisis was a “special case” .
European finance ministers have been charged with examining technical options for a one-off debt relief deal for Ireland. One German official said yesterday: “It’s becoming clear on the Irish side that the bank recapitalisation is not going to be the solution.”
Dr Merkel declined to discuss these ongoing talks but instead praised Ireland as a “leading example of how Europe will exit the crisis stronger than it went in”.
“We cannot forget that citizens have had to make big sacrifices,” she said. “We would just like to say thank you that Ireland is taking these steps that make all of us stronger.”
Both leaders expressed confidence that, despite disparate views, agreement would be reached this month on the upcoming seven-year EU budget.
