Thursday 21 March 2019

Our leaders must now take a harder line with Merkel and Sarkozy than before

Increasing our corporate tax rate would be economic suicide -- and it is the Government's job to prevent it, writes Michael McDowell

Early reports of the EU leaders' meeting on Friday indicate that while Greece was given both an extension of time and a reduction of interest on its bailout package, Ireland was refused any significant concession. Nicolas Sarkozy asked Enda Kenny for a "gesture" on our 12.5 per cent corporation tax rate. Well, he deserves a gesture -- but a gesture involving two digits and no other numbers.

The attitude shown by Sarkozy and Angela Merkel is predictable. France and Germany want to impose a uniform corporate tax regime across the EU. It is simply a question of exercising a demand for more power.

Corporate tax harmonisation would attract more and more corporate activity to the heart of the union and away from the geographical periphery. France and Germany do not want tax competition to act as a centrifugal counter-force to the centripetal forces of economic concentration that favour them.

It would be economic and political suicide for Ireland to make the gesture they are asking. And Sarkozy and Merkel couldn't give tuppence for Ireland's interests -- let alone our survival. It would suit their game for Ireland to survive, albeit in a weakened condition, an economic and political protectorate or province rather than a fully functioning sovereign partner.

Instead of a gesture, Ireland needs to send a very strong signal to Sarkozy and Merkel.

"The interest rate you imposed on us is punitive and intended to be dissuasive. It is doing very serious damage to Ireland's interest.

"We intend to stand up for ourselves and for our corporation tax rate -- now and in the future.

"We will not, in any circumstance, abandon or dilute the 12.5 per cent corporate tax rate.

"We expect Europe to sustain the euro. That involves assisting member states in economic crisis. Assistance means assistance. A punitive interest rate is not assistance. It is worsening our crisis.

"We will discuss and confer on genuine assistance. But not on tax harmonisation. Any concession on tax harmonisation would only compound the crisis. Even talking about it is damaging Ireland's recovery. Compris?"

Ireland and Europe share a common crisis. Portugal, Spain and Italy cannot afford an Irish meltdown. They would be the immediate casualties. Ireland has cards to play. And the 12.5 per cent corporate tax rate is not one of them. An Irish recovery is of vital importance to the eurozone.

Old Europe needs to get real about Ireland. They can't expel us. They had better be alert to the fact that they can't afford an Irish economic meltdown. They can't afford an Irish default. No Irish government can give Sarkozy the gesture he asks; most Irish people would gladly give him a gesture he wouldn't like. Remember, Lisbon I was lost partly due to his sabre-rattling on corporate-tax harmonisation. Lisbon II was passed when he and his friends were persuaded to shut up on the issue.

Blather about a two-speed Europe or a two-tier euro is just that -- blather. France and Germany are blessed with a college of federalist blatherers who whisper thoughts of accelerated integration into the ears of the gullible.

Why have they not integrated their tax, banking and defence systems in the 15 years that they have been blathering about enhanced cooperation as a possibility? In truth, it's a non-runner -- and it is only spoken about when federalists become impatient with the pace of integration.

Ireland needs to get real about Europe. We need a change of mind-set -- especially at the level of government, both elected and permanent. Irish self-interest and Old Europe's interests are not the same. Even if we share a crisis, we do not share the outlook, aspirations or interests of France and Germany.

We need politicians who know these realities. They must negotiate on our behalf with a sense of determination and grit that we have never shown before in Europe. They must learn to ignore the self-serving mantra of the more craven diplomats against Ireland being "isolated". No politician was present when the punitive interest rate was agreed with the IMF and the ECB. No politician should have allowed that rate to be agreed.

I remember well a conversation that I had with a very senior ex-civil servant on the weak-minded approach adopted by some of our diplomats on European matters. He placed his arm around me and said: "Have you not learned by now, Michael, how they deal with difficult European issues? They divide their approach into three phases. The first is the period when it would be 'premature' to take a stance. The second phase is when it would be 'too sensitive'. And the third is when it is 'too late'."

I wish Lucinda Creighton well in her new role of Minister of State for European Affairs. I add, however, that she had better shed her more federalist baggage and attitudes. She is wearing the Green Jersey now and this Government will never be forgiven if it does not stand up for Ireland and deliver in its dealings with the EU.

Michael McDowell is a former leader of the Progressive Democrats and a practising senior counsel

Sunday Independent

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