THE LATEST Franco-German proposals to address the EU’s financial crisis generated a cool response yesterday, amid doubts the package would find favour with member states.
Minister for Finance Michael Noonan said the plans for bilateral negotiations between France and Germany on their tax rate would have no effect on Ireland’s corporation tax rate.
Mr Noonan also expressed concerns about a proposal for a tax on all EU financial transactions, saying there would be objections to it from a number of member states.
Calls from Berlin and Paris for “real economic governance” and the pan-EU financial transaction tax pushed down bank shares yesterday.
In a joint letter, President Nicolas Sarkozy and Chancellor Angela Merkel proposed “closer co-ordination of national budget and economic policy” and “more efficient decision-making processes” beyond measures agreed last month and pending approval by EU parliaments.
“A common currency demands closer integration than was the case in the past,” said Dr Merkel’s spokesman, Steffen Seibert. He said efforts by France and Germany to harmonise corporate taxes, also announced on Tuesday, were a bilateral effort.
“We don’t need any other European allies to work on a leap forward like this. It’s something we aim to work on together.”
As well as bilateral tax harmonisation, France and Germany urged fellow euro zone members “to consider enhanced co-operation for further progress on tax co-ordination”.
Mr Noonan said Ireland had already signalled a willingness to engage constructively on the issue of tax co-ordination, in particular the combined corporate tax base, and this remained the case.
He was cautious on the proposal for a 0.01 per cent and 0.05 per cent tax on EU financial transactions.
Such a “Tobin Tax”, named after the economist who first proposed it in the 1970s, would be levied across the entire 27-member EU, German officials said yesterday.
“We can’t have a situation where there is a transaction tax in Dublin and there is no transaction tax in London,” said Mr Noonan.
He said there would be many objections to it from countries with strong financial services industries such as Luxembourg, the Netherlands and even France.
Mr Noonan also expressed caution on constitutional limit on public deficits, saying the Government would legislate to protect the public against reckless governments in the future.
He denied a proposal for a euro zone debt ceiling would see Ireland cede sovereignty to EU institutions.
His comments came after a new downgrade of the Republic’s debt. Canada-based DBRS last night downgraded Ireland due to what it said was the country’s “weaker than expected” growth prospects.