EU ECONOMICS commissioner Olli Rehn warned that Ireland’s international sponsors expect “continuity” on the State’s rescue plan after the election as he backed eventual lower interest charges on bailout loans.
German chancellor Angela Merkel gave nothing away about her attitude to a rate cut when she met Fine Gael leader Enda Kenny in Berlin yesterday, but German politicians dismissed his contention that corporation tax was off the table as EU leaders discussed reforms to the euro bailout fund.
As euro zone finance ministers gathered for the first in a series of meetings at which European authorities hope to toughen their response to the debt crisis, it emerged that the Dutch government was among those holding out against any immediate move to lower the charge.
Asked about demands led by Mr Kenny to renegotiate the terms of Ireland’s aid programme, Mr Rehn told reporters that flexibility was not in prospect immediately but he held out the prospect a review in future years.
“I’m of course following the Irish debate closely and I’m aware that in democratic politics we have freedom of speech and freedom of positions. At the same time, it is clear that the EU has signed the Memorandum of Understanding with the State, with the Republic of Ireland and we expect continuity and respect of the memorandum,” he said.
“It is essential to respect the plan, respect the memorandum and especially for 2011 the decisions are very much framed by the memorandum but concerning the outer years there is more room of manoeuvre.”
Mr Rehn did not elaborate, but made clear his support for the principle of a lower interest charge on rescue loans. “If there will be any changes to the pricing policy, which I personally support and the commission supports, it will take place for the overall European reasons not specifically because of electoral statements in Ireland.”
The pricing of the loans was under review in the light of concern about “the real issue of debt sustainability and its relation to growth dynamics”, he added.
As Germany seeks fresh policy concessions from Ireland in return for any lowering of the interest rate, sources briefed on the ministers’ meeting said there was no sign yet of any consensus emerging.
Diplomats said some ministers felt there was little point in pursuing the interest rate question until a new government was installed in Dublin.
Sources said the Dutch government was open to the possibility of lower interest charges from a new permanent bailout fund but not from the temporary fund from which Ireland is drawing down loans.
While countries such as Greece, Portugal and Spain favour lower interest rates, an official source said the countries which oppose lowering the rate were concerned that they sought parliamentary approval to join the fund on the basis that it would charge only penal rates.
In Berlin, German politicians dismissed Mr Kenny’s insistence that Irish corporation tax was non-negotiable. Mr Kenny told Dr Merkel Ireland was prepared to “pay and play its part” in euro zone reform, but that a change of government would not alter the official position on the 12.5 per cent tax.
However, leading CDU officials said the corporate tax issue was by no means off the agenda. “We’re not interested in one individual issue being factored out,” said a close political adviser to Dr Merkel.
Mr Kenny’s election rivals expressed scepticism about his meeting with the chancellor. “Whether it is a good idea or not to do that in the middle of an election campaign is something, I think, which remains to be seen,” said Labour leader Eamon Gilmore.
Minister for Tourism and Fianna Fáil deputy leader Mary Hanafin said: “Of course we would like to see any reduction in interest rates but that will only happen if all of Europe agrees to it. It is not going to happen just by Enda Kenny sitting down, having a chat with Angela Merkel.”
