EU debt ‘flexible but rules apply’

Everything will be done to help Ireland alleviate its debt burden, including early repayment of IMF loans, as long as what is proposed complies with existing rules, according to Germany’s EU Commissioner, Günther Oettinger.

EU debt ‘flexible but rules apply’

“Inside our rules, then it is no problem. We will use all flexibility, but everything has to be done in full agreement with the [EU] Commission, the ECB, the troika and the member states,” he said. The Government is looking to make early repayment of the IMF loans that were part of the bailout programme, as these loans carry an average interest rate of 5%, and the State can currently borrow closer to 2%, which could save the Exchequer up to €500m a year.

The Government is also looking to recoup some of the €30bn it pumped into the pillar banks, although Finance Minister Michael Noonan, said last week that he would also consider selling AIB directly to private investors as this could generate more for the Government.

Mr Oettinger was speaking to the Irish Examiner at an event in Stuttgart organised by the German-Irish Chamber of Commerce. He said that the terms of the bailout had been fair to Ireland. “We have a Eurosceptic party in Germany saying that we do too much for other member states, so it is a balance between solidarity and the existing rules and I think the balance so far has been quite fair.”

When asked whether it was wise for the Irish Government to consider tax cuts for low and middle-income earners before it had reached the 3% fiscal deficit target agreed with the troika, Mr Oettinger said: “You have some flexibility but you cannot go beyond existing rules.”

He praised the number of reforms the Irish Government has introduced. “I think Ireland has done a great job and I think your prime minister, Enda Kenny, has done a great job and I’m sure your citizens will re-elect him so he has some more years — these reforms take a long time.”

But also speaking to the Irish Examiner at the same event, the Minister for European Affairs for the State of Baden Würrtemberg the Social Democrats, Peter Friedrich, said that any debt breaks for Ireland would come with strict conditions.

“It is not just Ireland that has high debt levels, [but] I think there must be some kind of European management of debts for those countries with high and unsustainable debt. We cannot say the solution is that by cutting down public budgets, countries will get the revenue to serve this debt.

“However this would not be without conditions.”

At a minimum, the Irish Government would have to accept a harmonisation of the corporate tax base in return for a debt deal.

“I am talking about a harmonisation of the tax base because at the moment we see some companies not paying tax anywhere.”

When asked would Ireland be able to retain its 12.5% corporate tax rate, Mr Friedrich said: “I think we need to define a minimum taxation for companies. Of course rate and base come together but you have to look at the real level of taxation.”

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