Leaked EU paper details framework for new bailout deal
Published 02/03/2011 | 05:00
ENDA Kenny got a foretaste of what awaits him in Helsinki this week and Brussels later this month after a leaked discussion document produced by the European Commission spelt out the likely cost of any agreement to extend the scope of the European Union's bailout fund.
The document, written by aides to European Commission President Jose Manuel Barroso and European Council president Herman van Rompuy, is effectively a shopping list of German and French demands ahead of next week's meeting in Brussels, while showing some flexibility on corporation tax.
Among Germany and France's top demands is legislation in each country to limit national borrowing; demands for a common corporate tax base; calls for higher retirement ages; an end to centralised pay bargaining; as well as an end to early retirement schemes for civil servants.
The document suggests Enda Kenny and other European leaders will have to make compromises in these areas before Germany, France and other countries which are paying for the bailout, agree to boost the scope and capacity of the €440bn emergency fund for bailing out countries cut off from the bond markets.
Among the most radical changes would be the demand for a constitutional amendment or binding Dail legislation to prevent excessive borrowing in future. Germany has already passed a similar constitutional amendment and France also wants to. Greece is against the idea.
The four-page document, entitled 'Enhanced Economic Policy Coordination in the Euro Area, Main Features and Concepts' was drafted following consultations with all eurozone governments. A German government source said the European Commission document was "very encouraging".
The leaked document gives some clue about how the new government here will be able to claim a victory on corporation tax while also meeting German and French demands for tax harmonisation.
The European Commission will make a proposal for a common corporate tax base in the coming weeks.
Other issues which are sure to hit a nerve here include demands that unit labour costs in high-wage countries be monitored and compared to other eurozone countries. Ireland has some of the highest wages in the world, especially in the health and education sectors. Countries which face major challenges because of large and sustained rises of unit labour costs would be identified and forced to address them in a given time frame, it adds.
The document says governments should pay particular attention to enhancing decentralisation of wage bargaining -- something that could endanger Ireland's system of future social partnership deals.
Other ideas include raising the retirement age in some eurozone countries to ease the burden on public finances.