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Sunday 21 September 2014

Shane Ross: Noonan's tall tale on home tax

Shane Ross

Published 16/09/2012 | 05:00

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Michael Noonan must be nursing a sore head today. No, Noonan is not a big drinker so will have been able to resist the temptations of Cypriot hospitality out at the finance ministers' summit in Nicosia.

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Nor will he have overindulged on his visits to Paris, Berlin and Rome en route to the Mediterranean island's capital.

Paeans of praise have been pouring on to poor Michael's head. Commissioner Olli Rehn and European president Herman van Rompuy have been going over the top in lauding our finance minister.

No political head in European history has ever been patted more enthusiastically than Noonan's is these days. It has been patted in Paris. It has been patted in Rome. It has been patted in Berlin. Wherever he goes, his head is given a gentle pat and he is sent merrily on his way.

Last week, after he had finished at the less genteel Fine Gael Mayo think-in, Noonan headed on a charm offensive, hoping to woo French, German and Italian finance ministers. He wanted them to hurry up with the promise to give Ireland a bit of bank debt relief. He needs the good news before the December Budget.

You can only imagine the colourful language of the three most powerful finance ministers in Europe when they heard that Michael was dropping in again. Their responses would probably be barely printable.

The RTE cameras said it all when they filmed Michael and top finance mandarin John Moran being kept waiting by the French finance minister before they shared breakfast with him.

We can guess exactly what happened at all three meetings: Michael anxiously asked when Ireland was going to be given a banking deal. He said the Irish people expected good news in October. The delay was a bit embarrassing at home. He had been forced to indulge in verbal gymnastics converting the October "deadline" into a mere "target". Could they give him any comfort of a November or even a December date -- at the least a breakthrough before the Budget?

All three finance ministers will have told him to enjoy his breakfast and patted him firmly on the head. The party line in Europe decrees that Ireland is a star performer. Being the poster boy for recovery via austerity has its drawbacks. Ireland is now performing so well crucifying its people for the sins of Europe's bankers that some of our European colleagues affect not to understand why we need further relief.

Neither the European Central Bank nor the German finance minister Wolfgang Schaeuble are believed to be enthusiastic about giving Ireland improved terms, seeing it as a second bailout by the back door.

The Irish case will be stronger if the Spanish are soon forced to join us in the European doghouse. If that happens, we are demanding, with justification, to be treated as equals to Spain in banking bailout terms, insisting that bigger countries should not be given preferential treatment.

So we must pray that Spain is in bigger trouble than its Prime Minister Mariano Rajoy has yet admitted, that it will approach the European Central Bank in the coming weeks and beg for a full-scale bailout. If Spain admits disaster, Michael is on the pig's back.

Not a great place to be -- depending on the downfall of a friendly nation for our own recovery. The euphoria surrounding the news from Ireland's June summit triumph is beginning to dissipate. At that meeting, Ireland was given a special mention in the communique with the promise from Europe's finance ministers to make an assessment of the "situation in the Irish financial sector with the view of further improving the sustainability of the well-performing adjustment programme".

Little has happened since. Michael spent the last week being given the bum's rush, palmed off with platitudes in Europe. He was forced to indulge in further verbal gymnastics when he pleaded that the embarrassing delay in a banking deal might be good for Ireland.

The finance minister suggested that he would look foolish if he reached a deal now, only for it to be followed by a Spanish agreement on better terms. With a straight face, he insisted that his failure to extract better terms before October could be to Ireland's "advantage".

A good try. The truth is that we have little hope of relief unless Spain throws in the towel and begs the ECB for funds. Meanwhile, Ireland has no weapons at its disposal. That is the price we pay for being the poster boys.

Noonan needs a breakthrough before the Budget because back home the garden is far from rosy. As the storm clouds began to gather over the prospects of a property tax last week, he cutely took a heaven-sent opportunity to give the IMF a black eye. Our overseas masters released a report suggesting that the average property tax on family homes here should be set at €600 to raise €1bn. Like lightning, Michael was out of the traps to the media protesting that he was thinking of a figure of around half of that. He was positioning himself cleverly, for once able to grandstand, posturing as the protector of the Irish people against the draconian measures imposed by the troika. In reality, he is the chief imposer of their will.

The second imposer, the Taoiseach, insisted that the IMF was thinking of the longer term when it suggested that the average property tax payment would be €600.

Bingo. The IMF might be on the button for later years. A tax on the family home, once introduced, will be installed permanently. The Government has grim plans for the coping classes. And €300 in 2013 could easily be €600 by 2014.

If Michael can win an early deal in Europe, he might spot an opening to soften the blow on property tax. Or scrap it -- as he should.

But the likelihood of that is fading by the day. He knows that this tax will cause merry hell because it is blatantly unfair to pensioners, to Dubliners, to people in negative equity and to those already struggling to keep afloat. It will kill off any hope of a property market revival.

The Dail has not even resumed, yet the Budget is already dictating the entire political agenda in Europe and at home.

In parallel to the minister's European charm offensive, a massive softening-up process about the property tax is surfacing in the media. Leaks galore are appearing from impeccable sources.

It is being sold as hitting trophy homes hardest, there will be waivers, owners will decide on the value of their own homes, etc. The secrecy of the Budget is far from sacrosanct when spinning is needed. The population is being prepared for a body blow.

Buckets of praise in Europe are utterly useless to a people who are being punished at home with a property tax. No one in Europe mentioned the unpalatable news that went barely unnoticed last week.

The IMF, the source of much of the phoney praise, quietly downgraded Ireland's growth projections once again.

They expect growth rate to fall to 0.4 per cent this year (down from 0.7 per cent). Next year will be worse, with growth forecasts down from 2.2 per cent to 1.4 per cent.

That will mean less praise, fewer pats on the head and higher property taxes.

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