IRELAND’S low corporation tax is again under threat after this country’s problems have became the sticking point in coalition talks between Germany’s two largest parties, according to one of Germany’s leading newspapers.
Chancellor Angela Merkel is in talks with the opposition SPD party but officials from the socialist party believe Chancellor Merkel is too soft in her stance towards Ireland.
The SPD objects to plans for the European Union to extend a credit line to Ireland after we leave the bailout in less than two months, the Süddeutsche Zeitung reports today.
Mrs Merkel has signed off on the plan but the SPD says it cannot support a new German government unless Ireland is forced to raise corporation tax from 12.5pc, one of the lowest rates in Europe, and support German plans for a tax on all share transactions.
The CDU and SPD formed the last but one government in Germany and most analysts say the two parties are the most likely combination following last month’s German elections.
The disagreement centres around the use of a new EU rescue fund called the European Stability Mechanism to pay for some of the recapitalisation of the Irish banks. The SPD is particularly concerned over plans, agreed in June 2012, to allow the ESM to directly help banks. SPD finance spokesman Carsten Schneider is quoted by the newspaper as saying that Mrs Merkel must "go to Brussels" to withdraw consent to direct recapitalisations.