GERMANY HAS insisted that a renegotiation of Ireland’s bailout terms has neither been agreed nor is it connected to separate talks on further assistance to Greece.
Asked if Berlin was coming around to the idea of an interest rate cut for Ireland, finance ministry spokesman Martin Kotthaus said “there is no new situation”.
“One can talk about many things but if one wants a chance, then something has to change on both sides,” he said, a nod to Berlin insistence that Ireland raise its corporate tax rate in exchange for lower interest rates.
In Paris, European affairs minister Laurent Wauquiez reiterated France’s belief that Ireland should raise its corporate tax rate from 12.5 per cent. Asked about Ireland’s resistance to French demands to raise the rate, Mr Wauquiez said: “We believe that when a country is in deficit, it’s quite normal that it acts on the question of the tax take, and notably on the question of corporate tax.
“We’re saying clearly: we believe that that’s one of the levers Ireland must use.” Lauding recent moves towards closer economic co-ordination within the euro zone, the minister said that for the first time, “we have succeeded in pushing different European states towards putting in place the same corporate tax, instead of having a sort of competitive draw where everyone heads towards the bottom . . . We saw the example of Ireland, notably.”
Berlin officials dismissed descriptions of Friday’s meeting of some euro zone finance ministers in Luxembourg as a secret crisis meeting to discuss Greece’s exit from the euro zone. Mr Kotthaus said they were “not secret, simply not publicised, as are many informal meetings that take place”. He refused to be drawn on reports that Greece will need extra financial help from its EU neighbours, nor where Berlin stands on restructuring Greek debt.
“The matter does not arise (at present) and to discuss it would be speculative,” said Mr Kotthaus, pointing to the ongoing mission by EU/IMF officials in Athens. “The capacity to bear debt is why we have these analyses every quarter as a condition of the next consignment being paid out.” The finance ministry conceded that, besides funds from the ad-hoc Greece rescue fund, Athens could apply to the temporary European Financial Stability Facility from which Ireland is being financed.
Pressed on Friday’s meeting, he said it was not an “exclusive” meeting, had no decision-making powers and was composed of euro zone members who are members of the G20 as well as the representatives of European institutions.
Senior sources denied a Greek euro zone exit was discussed, or that German officials gave information to the Der Spiegel website that a Greek exit was on the agenda. However, officials agreed that, once the meeting became public, mistakes were made in how it was presented to the public, leading to a drastic fall in the euro against the dollar. Off the record, Berlin sources indicated the presence of Greek finance minister George Papaconstantinou was “to read him the riot act”.
“We wanted him to know that, if they want more money, they will have to do more,” said the source.
While the German government sits out the speculation on Greece, Chancellor Angela Merkel’s Christian Democratic Union (CDU) colleagues appear resigned to a restructuring of old Greek debt.
“With the existing debt from the past . . . we can see an interest rate reduction for Greece,” said Dr Michael Meister, parliamentary finance spokesman for the CDU. Such a reduction would come “in addition to agreed measures and in exchange for Greece carrying out massive privatisation measures to reduce the debt level.” The most recent data available, from last autumn, indicate that German banks have €18 billion in Greek debt on their books. Berlin’s contribution so far to the rescue fund is worth more than €8 billion.
Androulla Vassilio, the Cypriot European Commissioner for Education and Youth, yesterday added her voice to the growing chorus of concern on bailout interest rates, saying she “would be the last to support” punitive levels that could damage job creation efforts in Ireland and elsewhere. Speaking on the sidelines of the EU’s state of the union conference in Florence, Ms Vassilio said: “We have to deal with the facts of life. The economic frailties of today mean there’s no alternative”.The commissioner’s statement was in line with that expressed by other sources in Brussels yesterday that the EU’s executive body favoured lower interest rates.