Kenny to discuss rate cut with EU chief

CUTTING the interest rate on the country’s bail-out loan will be top of the agenda when Taoiseach Enda Kenny meets EU president Herman Van Rompuy in Dublin today.

Mr Kenny is hoping to hear some positive newsfollowing Mr Van Rompuy’s meeting with the French president, Nicolas Sarkozy in Paris earlier this week. They will also discuss the crisis in Greece, being referred to as Europe’s “Lehman moment”.

The French, backed by the Germans, have been demanding that Ireland increase its corporation tax rate in exchange for the interest reduction.

Behind the scene negotiations on a compromise agreement are ongoing in Brussels at a technical level.

However there were indications from Paris that French president Nicolas Sarkozy may be willing to agree to an alternative to changing the tax rate.

The Irish have been offering to engage in discussions on a single EU-wide basis for calculating company tax that does not involve harmonising tax rates, known as the CCCTB.

“This may form the basis of an agreement — but we cannot be sure yet,” a source said.

A Government spokesperson reiterated that the corporation tax rate was not on the table. “We will only engage on the CCCTB issue,” he said.

Mr Van Rompuy offered Mr Kenny a deal saying Ireland would engage in “constructive discussions on taxation issues” when he attended his first EU summit as Taoiseach last March. Mr Kenny turned down the deal, which his aides later explained by saying he feared it was a trap.

The issue may not come up at next week’s EU summit in Brussels as it is in danger of being buried under efforts to save the Greek economy and prevent the uncertainty swamping other eurozone economies, including Ireland.

While commentators were warning that this was now Europe’s “Lehman hour”, there were indications of a breakthrough in agreeing to give Greece its fifth loan tranche in July, in time for them to meet debt commitments.

There was a fear that the IMF would not agree to hand over its share of the €12 billion tranche since the future solvency of the country was unclear and under its rules it can only give money to countries that are solvent for the next 12 months.

There is general agreement for a second bailout for Greece but Germany is demanding that private bondholders contribute by agreeing to roll over their loans as they mature and extend them for a further seven years.

The Greek government remains on an knife edge with prime minister George Papandreou putting together a new cabinet before calling a vote in the parliament.