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Fury at French leads to consideration of cut in corporation tax

The Government's failure to secure a cut in the penal interest rate being charged on Ireland's so-called 'bailout' and worsening diplomatic relations with France over corporation tax have been the catalyst for a surprising increase in Euro-scepticism within Government circles.

Last week in Europe, Finance Minister Michael Noonan -- who has previously been markedly restrained in his comments -- sharply criticised the current ECB bailout strategy and, for the first time, openly asked if it offered a realistic road to success.

Now, the Sunday Independent has learned that senior political figures are not ruling out the possibility that the under-fire Irish corporation tax rate of 12.5 per cent might be cut to 10 per cent or an even lower rate -- rather than being increased -- if the Irish Government does not soon receive a similar cut to that secured by Greece to the interest rate being on its bailout.

Such a development would represent a major U-turn in the Government's strategic plan to re-engage with Europe.

One of the central planks of Enda Kenny's election campaign was the role the Taoiseach's 'special relationship' with Angela Merkel and the EU christian-democratic party could play in improving the terms and conditions of our so-called 'bailout'.

But the perception is growing in Government that Ireland's attempts to re-engage with Europe have been misconstrued and that we are "seen as being a softer touch than Portugal and Greece".

In a week where the head of the US Chamber of Commerce, Thomas Donoghue, warned that any rise in corporation tax would damage US investment into Ireland, one angry senior government figure noted: "Ireland is trying, manfully, to meet our commitments and we are being treated like a rogue outlier state to suit the domestic ambitions of Sarkozy."

They added: "When that little man (Nicolas Sarkozy) came here, he gave us absolute assurances. We supported Lisbon Two and we supported the referendum on the basis that Europe creates jobs."

Such is the growing anger within high-level Government circles now over the French "hypocrisy about going after our 12.5 per cent when their real rate is four per cent lower'', that the possibility of Ireland "reducing our rate to 10 per cent or even to 7.5 per cent is being canvassed," according to the Government figure.

One source close to the heart of the Government said it had not been discussed at cabinet level yet. But they noted that reducing corporation tax was "not that crazy. If they (the EU) are threatening to destroy us, we have to take whatever steps are necessary to protect ourselves."

Sunday Independent