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Jospin attacks Ireland's 'unfair tax competition'

THE French Prime Minister took a swipe at Irish tax and economic policies during a keynote speech on the future of the EU yesterday.

In a thinly-veiled attack on Ireland, Lionel Jospin demanded that the EU harmonise corporate tax rates and called for an end to unfair tax competition from "certain member states".

He also called for the creation of an economic government within the euro-zone to co-ordinate economic policies.

And he demanded that countries should consult with each other before announcing decisions which affect the Euro-zone as a whole.

The suggestions come after the public clash between Finance Minister Charlie McCreevy and the rest of the EU over Irish economic policies.

Although a formal "recommendation" has been taken against the December budget, current EU rules do not permit any harsher sanctions.

Now Mr Jospin clearly wants to toughen up the system to prevent any member states from implementing economic policies which do not enjoy widespread support.

But his suggestion for tax harmonisation was swiftly rejected by the Government, which pointed out that this proposal was firmly defeated during the negotiations that eventually produced the Nice Treaty.

"Our position on tax harmonisation is crystal clear, we're firmly opposed to it," said a Government spokesman.

He said Taoiseach Bertie Ahern would not comment on the speech until he had time to study it, but insisted that despite Mr Jospin's enthusiasm, it was "not a runner".

"The issue was debated at Nice and rejected there and we have no indication that it's a runner on the European agenda," he said.

The Taoiseach's relations with Mr Jospin are probably the frostiest of any EU leader.

In the past, the French prime minister has berated Irish tax policies, while Mr Ahern blames the French for repeatedly demanding tax harmonisation at Nice, despite clear veto threats from both Ireland and Britain.

In the speech, delivered in Paris yesterday in response to German calls on the future shape of the EU, Mr Jospin declared: "We must finally take action to stop any behaviour detrimental to the general European interest.

"Combating 'tax dumping' is one immediate priority; it is not acceptable for certain member states to practice unfair tax competition and (act as) offshore headquarters of European groups.

"Ultimately, the corporate tax system as a whole will have to be harmonised," he said.

Ironically, the call for tax harmonisation comes just days after the European Commission made a complete u-turn and announced it no longer favoured the plan.

Low corporate tax rates and the successful luring of multinationals to Ireland are widely accepted as key factors, along with EU membership, for Irish economic success.

However, Mr Jospin urges a stronger social agenda for the EU and calls for the commission president to be elected by the European Parliament - a move that if in practice now could see Munster MEP Pat Cox set to take on the powerful role.