Business Irish

Thursday 25 May 2017

Coalition looking for way to placate EU on bailout loans

Pressure on Ireland in hunt for trade-off

Emmet Oliver and Sarah Collins in Brussels

THE Government was casting around last night to find a concession to placate EU partners still refusing to cut the punitive 5.8pc interest rate on Ireland's bailout loans.

A succession of government ministers yesterday insisted Ireland's 12.5pc corporate tax rate could not be the concession, but they couldn't pinpoint an alternative capable of winning over key players like Germany, who want Ireland to give ground on corporation tax in a quid pro quo.

After a day of shuttle diplomacy, Irish politicians appeared to be upbeat about getting a deal soon on the interest rate, but those on the other side of the table seemed less enthusiastic.

"There is scope there and a willingness to facilitate Ireland," claimed European Affairs Minister Lucinda Creighton, speaking in Brussels. Ireland was getting "very positive vibes" and "sympathy" from other member states, she added.

But the official position of Germany, Europe's paymaster, remained unchanged, with that country's finance minister delivering a blunt message.

"When someone wants to change a contract which he has just agreed to, then he has to think not only about what the other party to the contract should change, but he must also come up with suggestions about what he can change himself," Wolfgang Schaeuble said.

The message from ECB chief Jean-Claude Trichet was equally uncompromising.

The central banker said Ireland can and must pay its government debts and its bank debts. "Ireland can do it, Ireland will do it," he said in the European Parliament.

While Ireland is prepared to bring in new curbs on annual spending, known as a 'debt brake', many observers in Brussels believe this won't be sufficient to force Germany or France into a concession on the 5.8pc rate.

German Chancellor Angela Merkel has already demanded a specific concession in the corporate tax area.

Ms Creighton, who accompanied Finance Minister Michael Noonan to Brussels, said there was no "appetite to interfere with tax rates" among member states, but this seemed to clash with repeated demands for change from France's President Nicolas Sarkozy and Ms Merkel in recent weeks.

TENSE

The stage is now set for tense negotiations on Thursday and Friday when Taoiseach Enda Kenny attends the European Council meeting, where Mr Sarkozy and Ms Merkel will be present.

Ms Creighton said it was not guaranteed that an agreement would be reached there, but there was "movement" behind the scenes and the Department of Finance could be involved in producing a suitable concession or "gesture" as she called it.

The Government also upped the ante yesterday on the controversial issuing of burning bondholders, another move that is being strongly resisted by the larger European powers and the ECB.

The Government has no other choice but to push "strenuously" for senior bank bondholders to share in the country's debt burden, Minister for Communications, Energy and Natural Resources Pat Rabbitte said.

Deeming the EU-IMF bailout to have "failed", Mr Rabbitte said EU policymakers were now coming around to the idea they would have to revise the terms of the deal if Ireland was to implement it.

"The first goal of a bailout programme is market access within a reasonable time and . . . my personal conviction is I don't see any prospect of us being able to re-enter the markets in a reasonable period," Mr Rabbitte said.

"This is a eurozone problem. It's true our banking system behaved recklessly but it's also true that those who lent to them behaved recklessly."

He added that "sharing the burden" was still an option. "I don't think the Government has any choice but to push it very strenuously now and later. In terms of suggesting it's off the table I can't see that being the case," he said.

ECB President Mr Trichet refused to be drawn on the statements when questioned by the Irish Independent, but said he would "analyse" them once he had been briefed.

Mr Trichet and Mr Noonan were meeting last night during the Brussels talks to discuss the ¿150bn the ECB has committed to Ireland.

Mr Noonan wants the ECB to draw out Ireland's exit from the banks' emergency liquidity lines, saying the funding is "very important" to the Government."

''We appreciate the assistance we've got from Europe and particularly the assistance we're getting on an ongoing basis from the ECB to maintain liquidity in the Irish banking system," he said.

"That's very important to us."

Irish Independent

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