Concerns over EU demands for back-up credit
Corporation tax could be dragged into debate
THE Government is edging away from taking up an overdraft facility on exiting the bailout as it is worried about what EU countries will demand in return.
The low corporation tax could be dragged into the debate, even though there are no grounds for making it a condition for approval of an emergency loan.
Finance Minister Michael Noonan is fighting what he regards as unacceptable conditions attached to a back-up loan after Ireland emerges from the bailout next month.
The Coalition is concerned the conditions attached to a credit line could allow the opposition to say the country is still in a bailout.
The possibility of an informal commitment to support Ireland, if it needed help, without requiring an agreement with tough conditions, is also being examined.
"No one wants that [conditions]. What's also being looked at is the promise of a credit line, rather than the reality of a credit line," a minister told the Sunday Independent.
"It is a political problem if having conditions allows the opposition to call it a bailout. The European Council also sees it as a problem as it has to pass some parliaments."
Coalition sources said the decision on making a clean exit from the bailout is "finely balanced" with a decision to be taken in the next three weeks.
Although it would fall outside the terms of agreement, Ireland's low rate of corporation tax could still be dragged into the debate as the deal would have to pass through the parliaments of some EU member states.
"There's nothing to stop someone trying [raising corporation tax]. I don't think the issue here would be with the Troika institutions. It's the kind of things that might be thrown in by member states, each of whom have a veto," a senior government source said.
"You won't get something that doesn't have to go through parliaments. Parliamentary approval, in some places, is going to be needed, certainly in Germany."
Mr Noonan will continue to travel to meet his counterparts and will discuss the bailout exit options with Eurogroup chair and Dutch finance minister Jeroen Dijsselbloem in The Hague on Tuesday.
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Mr Noonan is adopting a tough line, insisting the Government will not accept any further condition over and above what is already contained in EU budget rules.
Among the conditions which it is feared could be imposed on the country in a scaled-down bailout programme, described as a "mini-MOU" (memorandum of understanding) could be:
* Quarterly reviews by the Troika, whether in person or electronically.
* A scaled-down version of the Memorandum of Understanding, with specific targets.
* Supervision of policy implementation.
* Reforms in health and social welfare, resulting in more cuts to benefits and services.
* Clearing the government legislative programme of upcoming laws.
* Privatisation of more State assets.
* Additional tests and changes to the banking sector.
A large concern is the prospect of an agreement on a precautionary credit facility having to pass through EU member parliaments.
"A lengthy process of approving the programme in various member states is not helpful to us. All the budget surveillance under the Fiscal Treaty will apply to us anyhow. It's what would be additional to those rules.
"Where you get into issues being brought through the parliaments is where you get into difficulties with politicians and committees. You can imagine what it would be like if you had to bring it through the Dail or an Oireachtas committee," a government source said.
The German view of whether Ireland needs the backstop is overshadowed by the issue of parliamentary approval.
"The Germans view of it is dependent on how formal it is and having to have it ratified by the Bundestag," another source said.
"The Germans like to do it by the book. It's finely balanced. At the moment, it's edging towards a clean exit. But I wouldn't go putting money on it," a Department of Finance source said.