‘No hope’ of deal on €64bn bailout

-Merkel adviser insists collapse was of Ireland’s own making

One of German chancellor Angela Merkel’s top advisers said there is “no chance” of the Government getting a deal on the €64bn bank bailout because the collapse was of Ireland’s own making, adding: “It was your property bubble.”

“The European Stability Mechanism can only be used in the future. It cannot be used for legacy debt. I don’t see a chance for Ireland on this,” said German MP and economic policy spokesperson for the ruling CDU party Joachim Pfeiffer.

Dr Pfeiffer did not accept there is any wider responsibility for the collapse of the Irish economy and the ensuing banking and debt crises.

Moreover, he is emphatic about where the blame lies. “What happened was homemade,” he said. “It was your decision to guarantee the banks. It was your property bubble.”

He argues that there has already “been some burden-sharing” by means of the extension of Ireland’s EU bailout loans and the restructuring of the promissory notes.

Dr Pfeiffer explained that the ESM can only be activated when certain steps had already been taken, such as the bail-in of creditors, capital raising by the banks, and contributions from national governments. This precludes the possibility of dealing with legacy debt, he said.

Speaking to the Irish Examiner following an engagement in Dublin yesterday, Dr Pfeiffer declined to say whether he had any sympathy for the Government’s position that there should be burden-sharing of the bank debt through the ESM.

Dr Pfeiffer acknowledged that Irish people “have suffered hardship” as a consequence of the bank debt and the economic crisis, but, “Ireland now has the right growth model for the future” following the reforms introduced during the bailout programme.

A spokesperson for the Department of Finance said there was a clause in the ESM which enabled the recapitalisation of legacy debt under Article 14 of the latest operational framework.

The Government will not apply for debt relief until later this year when the Single Supervisory Mechanism as part of EU banking union is up and running, added the finance spokesperson.

Dr Pfeiffer said he “personally had no problems” with Ireland’s 12.5% corporate tax rate.

Faced with a shrinking revenue base, the Government decided to raise taxes from other sources, including a property tax, he said.

During the negotiations for Ireland’s EU/IMF bailout package in November 2010, Ms Merkel was one of a number of EU leaders who demanded that the Government raise the corporate tax rate as a quid pro quo for funding.

Dr Pfeiffer, 47, has been a member of the Bundestag since 2002.

Asked whether Ms Merkel has acted in the national interest during the eurozone crisis, he said that “Germany had shown a huge amount of solidarity” with other countries.

“The way forward was for every member state to improve its competitiveness,” said Dr Pfeiffer. “[I do] not think another EU treaty change will be needed.

“We need to start using the treaties we have.”


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