Bailout deal designed to protect EU banks, says union group
Published 24/02/2011 | 05:00
IRELAND'S incoming government should try to delay the country's debt repayments and push for lower interest rates on EU loans, a report published by the European Trade Union Institute says.
The report, written by a current and a former member of the Tasc think tank, says that last November's €85bn bailout deal is "designed to protect the European banking system and to buy time for Europe", and will not cure Ireland's financial ills.
"If implemented (the deal) will at best consign Ireland to economic stagnation for some time to come, and may force a unilateral default of the unsecured banking and/or sovereign debt," the report says.
It adds that the European Central Bank's insistence on protecting bank bondholders, the "punitive" 5.8pc interest rate on the EU loans and the harsh austerity plan will weigh on growth for years to come.
The requirement to run down the National Pension Reserve Fund and other cash reserves to overcapitalise the banks has also dealt a blow to any investments the Government might seek to make in the economy.
Penned by Tasc's ex-director Paula Clancy and analyst Tom McDonnell, the report recommends reneging on at least some of the country's banking debts, estimated at €50bn, and most of which are covered by a government guarantee.
The authors also urge the Government to consider a future hike in the 12.5pc corporate tax rate, a move favoured by French president Nicolas Sarkozy.
However, the report says that raising the tax rate now could turn the recession into depression by causing a flight of multinationals out of the country.