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Ireland 12.5, France 0: Corporate tax spat over as country to save hundreds of millions

A lower interest rate means savings of between €600 million and €800 million on Ireland’s loans. And corporate tax? C’est fini. But what’s the future for Europe?

Enda Kenny in Brussels yesterday
Enda Kenny in Brussels yesterday
Image: Press Association

IRELAND IS SET to save between €600 million and as much as €800 million in interest repayments on its bailout after a deal was hashed out by Eurozone leaders in Brussels yesterday.

The Taoiseach also commented on the country’s spat with France over corporate tax: “C’est fini”.

Enda Kenny was speaking after the 17 leaders of the Eurozone countries agreed a second bailout for Greece worth around €109 billion with interest rates cut on loans from nearly 6 per cent to between 3.5 and 4 per cent.

This will apply to the remaining €18.9 billion which Ireland is still to draw down from the European Financial Stability Facility (EFSF).

The Irish Independent reports that a cut on interest paid on the rest of the money being borrowed from the European Commission fund – around €22.5 billion – and just over €5 billion from the UK, Sweden and Denmark “may follow” after technical talks with the governments concerned.

Ireland will also benefit from longer repayment periods which will increase from around seven to at least 15 years.

Speaking on RTÉ’s Morning Ireland this morning, RTÉ’s European correspondent Tony Connolly suggested this could extend to as long as 30 years.

On corporation tax, which Ireland has long sought to protect from demands by France that it be raised from its current level of 12.5 per cent, the Taoiseach said that the dispute was at an end, reports the Irish Times:

It’s over, c’est fini. I had a very cordial conversation with the French president.

Opposition reaction has been mixed.

Fianna Fáil finance spokesman Michael McGrath welcomed measures that will benefit Irish people but said that the government needs to clarify any commitment to engage in discussions on corporate tax harmonisation.

Sinn Féin’s Pearse Doherty said that the only way to reduce the debt burden was by burning the bondholders and imposing loss sharing on the European Central Bank.

RTÉ reports that independent TD Shane Ross said that default was now on the agenda and is now a reality despite months of pretending otherwise.

Indeed , the restructuring of Greece’s debt which involves private lenders of Greek debt taking a hit of nearly €50 billion over three years is widely being viewed as the Eurozone’s first ever default, according to the Telegraph.

Such a move was backed by Germany but resisted by France and the ECB for fear of market contagion. It appears Germany has got its way.

BBC News reports on the repercussions this might have including banks being forced to recognise billions of euros of losses on Greek debts overnight leaving them short on capital to lend, and short of Greek debt to use as security against borrowing.

The deal also paves the way for what the Guardian calls a “vast expansion” in the role and powers of the EFSF’s €440 billion bailout fund.

The French president Nicolas Sarkozy said that he and German chancellor Angela Merkel will be outlining joint proposals on the economic governance of the Eurozone to make a “quantum leap in Eurozone government” later his summer.

Hailing a historic deal, Sarkozy said that while there was not yet a ‘European Monetary Fund’ there was nearly one.

Read: Full text of the statement by the Euro area leaders & EU institutions approved at today’s summit >

About the author:

Hugh O'Connell

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