| 11.4°C Dublin

Sarko is at it again, eyeing tax rise here

THE leaders of Europe's largest economies have their eyes on Ireland's 12.5pc corporation tax as we face a referendum to limit Government borrowing.

German chancellor Angela Merkel and French president Nicolas Sarkozy outlined measures to try to reassure investors of the viability of the euro.

The leaders pledged to work towards a common corporation tax by 2013 as well as prepare annual budgets on harmonised economic outlooks.

But there are fresh fears that Ireland's lucrative tax rate, which has lured hundreds of multinational companies here, is once again on the block.

Eurozone leaders detest this advantage we have over our neighbours.

In addition, Irish people now face a referendum within 12 months to place borrowing limits on the day-to-day running costs of the country. The leaders have also proposed a twice-yearly summit of eurozone leaders.

Investors were unimpressed by the announcement at the conclusion of the Franco-German meeting as European stocks opened lower this morning.

The ISEQ was down 0.8pc, London's FTSE 100 dropped 0.2pc, the DAX in Germany fell by 1.4pc and France's CAC-40 lost 0.6pc.

Market speculators were hoping for an announcement that commonly issued eurozone bonds would be created or the €440bn European financial stability fund would be reinforced -- but the two leaders refused to bow to pressure.

Minister for Finance Michael Noonan said that the joint statement from the leaders was an initiative reaffirmed an "absolute determination" to defend the euro.

Mr Noonan said that the move which would mean a referendum to change the constitution to introduce a ban on excessive borrowing could be welcomed.

DAN WHITE: Pages 14-15