GERMAN finance minister Wolfgang Schaeuble is a friend of Ireland who would do nothing damaging to the country, Finance Minister Michael Noonan said tonight.
The comments come just days after Mr Schaeuble signalled Europe's bailout pot was unlikely to pay some of the cost of our multi billion euro bank bailout, despite hopes from the Government to the contrary.
"They don't have a lot of leverage on us now that we're nearly out of the (bailout) programme. He wouldn't do anything that would be damaging to Ireland, " Mr Noonan told the Dublin Economics Workshop being held in Limerick.
"He's a friend as is Chancellor Merkel."
The German comments earlier this week appeared to be the latest blow to Ireland after the country's second biggest party insisted the Government must raise the 12.5pc corporation tax rate.
Reports last week said early coalition talks between the social democratic SPD and Angela Merkel's conservative CDU were snagged on Irish issues. The SPD is also completely opposed to the direct recapitalisation of troubled European banks through the European Stability Mechanism (ESM)
Mr Noonan reiterated in the Budget that our 12.5pc rate will be maintained. He said tonight that Tanaiste Eamon Gilmore has a good relationship with the SPD and that there was a "bit of diplomatic activity going on in the background" to ensure that nothing is said in the negotiations to form a coalition that would damage Ireland's interests.
On elements of the Budget, Mr Noonan said "taking things away from people is always very difficult."
"It's probably the hardest thing in politics," he said.
He said some people had been calling on the Government not to scale back from the originally planned €3.1bn adjustment, but that there had to be political management, pointing out there were little protests following Tuesday's Budget announcement.
The minister also said that the announcement in the Budget of measures to tackle aggressive tax avoidance by multinationals had not sparked threats from companies to leave the country.
"Actually there's been a very good international response and by looking after our reputation, I think we have enhanced Ireland as a location for foreign direct investment."
Mr Noonan said the banking sector in Ireland wasn't sufficient to carry an economy to which he would aspire.
"Im not sure that any banking sector in Europe is at this stage, because they've all deliveraged so much," he said.
Mr Noonan is travelling to Strasbourg and Frankfurt next week to meet with the European Commission and European Central Bank, and the following week to the IMF in Washington, to discuss exiting the bailout.
He said no decision had been made on seeking a so called precautionary credit line, a form of overdraft, to ease the country's full return to the money markets.
"There is a strong view that we don't need alternative arrangements. Im risk averse on all these things so Ill take the best advice I can get, we'll reflect on it and see what our next move will be."