Saturday 23 September 2017

Stalemate broken in talks on bailout cut

Sarkozy softens line on corporate tax

Taoiseach Enda Kenny and French President Nicolas Sarkozy
found time for a laugh and joke during their talks at the EU
leaders' summit in Brussels last night after the pair made a
significant breakthrough in negotiations
Taoiseach Enda Kenny and French President Nicolas Sarkozy found time for a laugh and joke during their talks at the EU leaders' summit in Brussels last night after the pair made a significant breakthrough in negotiations
Taoiseach Enda Kenny, left, with Belgium's Prime Minister Yves Leterme, French President Nicolas Sarkozy and German Chancellor Angela Merkel at the European Council in Brussels yesterday

Fionnan Sheahan in Brussels

Taoiseach Enda Kenny last night made a significant breakthrough in negotiations with Nicolas Sarkozy on securing a cut in the interest rate on our bailout.

Irish and French officials are working to find an agreement on tight new budgetary rules which the Government would agree to in return for the interest rate cut.

Mr Kenny spoke directly with Mr Sarkozy at the summit of EU leaders in Brussels and agreed talks "would continue until a satisfactory outcome was reached".

Although the interest rate cut is not yet secured, the development was viewed by Government officials as "encouraging" as the stalemate was broken.

At a summit dominated by the Greek economic crisis, EU leaders also praised Ireland for implementing the terms of the bailout, which they concluded "is well on track".

France is softening its stance on an increase in our corporation tax rate in return for a bailout cut and appears to be set to drop it completely.

Last night, a government spokesman confirmed the Taoiseach and French president had a meeting on the margins of the summit.

The pair agreed the current process of negotiations "would continue until a satisfactory outcome was reached", the spokesman said.

The verbal agreement between the pair is regarded as a key stepping stone in reaching a final deal.

Ireland's achievements so far in reaching targets under the EU-IMF bailout were officially acknowledged at the European Council meeting.

Reading from the summit conclusions, European Commission President Jose Manuel Barroso said: "The council welcomes progress made in Ireland in the implementation of its reform programme, which is well on track."

The summit also welcomed the commitments by the new government in Portugal to implement its plan.

"Building on a cross-party consensus on the need to reform, strict implementation of those programmes will ensure debt sustainability and will support the return of Ireland and Portugal to the financial markets," Mr Barroso said.

Addressing his EU colleagues, Mr Kenny again reiterated the Government's staunch opposition to an increase in corporation tax.

Instead of a corporation tax hike, the French are now believed to be looking for a concession from the Irish government on the broad area of maintaining tight budgets.

Coalition sources indicated that options being explored include commitments from the Government not to go beyond budget allocations in areas of spending.

If money allocated for a specific area ran out before the end of the budgeted period, it would not be topped up.

The Government would also have to sign up to stringent budgetary restrictions.

The agreement would allow the French to say it had secured concessions from Ireland, while the Government could maintain it didn't concede ground on corporation tax.

Mr Kenny also said he did not expect a deal done at this summit on the bailout interest rate.

The European Commission is currently pushing controversial proposals for a Common Consolidated Corporation Tax Base (CCCTB).

But it is not believed this is the sole target of the French in the talks with Ireland.

The Government has agreed to enter discussions on the CCCTB proposals but nothing further, so this would not satisfy the French necessity for a concession.

During his first trip to Brussels after becoming Taoiseach in March, Mr Kenny said he would "not support any adoption" of a common corporation tax base.

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