ANALYSIS:One detail that was not in any doubt was the interest rate cut afforded to Ireland
EURO ZONE leaders had barely left Belgian airspace on Thursday night when waves of confusion crashed in over the second Greek rescue plan.
It seemed so simple at first: leaders had agreed in principle to lend Greece another €109 billion through the rescue fund, on top of the €110 billion already granted last year. Greek loan maturity would be doubled to 15 years and the interest rate dropped.
Banks had promised additional voluntary contributions worth €37 billion.
So far, so good. But two hours after the deal was presented, journalists with midnight deadlines approaching found at least four different interpretations of the figures. What was included or excluded? What was a concrete figure and what was an estimate? Worse, each view was confirmed by at least one EU institution or member state official.
The irony of it all: the final document was slow coming because Germany and others insisted on adding concrete numbers to, as one official put it, “minimise the potential for confusion” caused by translations.
As befuddled journalists departed the hulking Julius Lipsus building for the night, the correspondent of one eminent business newspaper was shouting down the phone to a commission official: “You can’t count! It’s no wonder you can’t run a currency!”
Tempers had cooled somewhat in the cold light of day yesterday, though even after a technical briefing some figures remained up in the air. One reason for that is because finance ministers and lawyers have to turn yesterday’s political proposals into a legal contract. The other is that many figures agreed are forecasts, expectations and undertakings. Given the nature of what is under discussion, they could never be anything but.
One detail that was not in any doubt yesterday was the interest rate cut for Ireland. In Brussels, Irish diplomats were bathing yesterday in the afterglow of a successful end to months of diplomacy and dogged lobbying. They insisted Taoiseach Enda Kenny was correct that the interest rate cut came “with no strings attached”.
Back in Berlin, Chancellor Angela Merkel seemed less convinced. “Specific conditions” such as Ireland’s corporate tax rate were not discussed at the meeting, she said, paraphrasing a summit conclusion that “Ireland has promised to work together” with EU partners on future tax reform discussions.
“We’re dealing here with a little bit of a trust in advance,” she said.
Irish officials are touched by this show of trust but point out how, like Germany, Ireland remains sceptical of EU tax reforms, particularly plans to create a consolidated, common corporate tax base. Ireland will participate in talks, an official said, but with an open mind.
“If we’re convinced, fine, if we’re not, we’re not,” said one Irish official. “It doesn’t change our view now nor does it precommit us to something.”
After months of energetic pursuit, insisting on a corporate tax hike in exchange for a loan interest rate cut, French president Nicolas Sarkozy was in remarkably magnanimous mood after the Brussels deal. Without mentioning Greece and Ireland by name, he said it would be “deeply unfair” to punish countries making reform progress.
“We’re giving everyone the same [interest] rates and [loan] maturities because, if we didn’t, it would be like saying that a country that had made a major effort and respected its commitments would find itself with higher rates than a country that hadn’t succeeded.”
French officials remain confident, though, that this is not the last we’ve heard of corporate tax reform. If Ireland finds itself in need of an EU favour anytime soon, don’t be surprised if Paris dusts off its demand for a rate hike. C’est fini, Monsieur Kenny? Jamais!