Noonan fears British opt-out will hurt Ireland

FINANCE Minister Michael Noonan fears our financial services industry may be at risk from Britain’s opt-out from closer EU integration.

Mr Noonan also fears that damage for Ireland could go deeper without its closest neighbour at the EU negotiating table.

The Government is trying to limit diplomatic damage after Britain last week refused to join the EU’s other 26 countries in working towards a new fiscal union, leaving Dublin more exposed to German and French calls for tighter financial regulation.

Of particular concern to Ireland, a major centre for funds administration in Europe, is a proposed pan-European financial services tax that may bypass Britain.

“Obviously there will be disadvantages for Ireland if a financial transaction tax will be applied in Dublin and not be applied in London as well,” Mr Noonan said ahead of a meeting with British Chancellor George Osborne.

“We in Ireland would prefer if this was an agreement of the 27.”

British Prime Minister David Cameron cited the need to protect Britain’s financial services industry as the reason for refusing to sign up to closer fiscal union last Thursday night.

But analysts said Britain’s sidelining poses far more fundamental problems for Ireland.

Despite a bloody history, Dublin is ideologically closer to London than it is to Brussels and piggybacks on its larger neighbour’s clout in negotiations.

“Diplomatically speaking, we’re in a much poorer position because Britain is not in the room,” said Hugo Brady, senior research fellow at the Centre for European Reform.

“They were quite willing and quite happy to be the difficult partner so you could hide behind them in diplomatic negotiations,” he said. “By basically doubling or tripling our chances of getting isolated, Britain has done us no favours.”

Britain has been a key ally in resisting French and German attempts to harmonize taxes across the European Union, which threaten Ireland’s 12.5% corporate tax rate, seen as essential in attracting foreign investment and supporting the local economy.

While Mr Noonan was in London, European Minister Lucinda Creighton was in Paris warning that Ireland had “a very deep concern” about the plans for 26 countries to go ahead without Britain.