Donohoe declines to criticise Germany’s role in Ireland’s bailout

Minister for Finance Paschal Donohoe has declined to criticise Germany's role in Ireland's bailout programme a decade ago, though he agreed the process had been challenging.

Mr Donohoe was in Berlin on Tuesday to met federal finance minister Olaf Scholz, his predecessor Wolfgang Schäuble and other German government officials.

On Monday, a former senior German finance ministry official this week criticised Berlin for pushing what he called a damaging and undifferentiated austerity programme for Ireland a decade ago.

Mr Donohoe declined to comment on the comments initially, telling The Irish Times that “hindsight is the very finest of qualities”.

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Asked if, in hindsight, German demands of Ireland were overly harsh, Mr Donohoe said there was a “huge amount of learning to be had” on obligations facing programme countries a decade ago.

“The design of some of these programmes created additional challenges for countries trying to get out of programmes, as Ireland was,” he said. “From the side of Ireland, one of the lessons I have learned is to do all you can to avoid being in situation where you are locked out of financial markets and where your economic sovereignty is compromised. When you become that vulnerable all choices open to you are bad.”

A spokeswoman for the federal finance ministry in Berlin declined to comment on the comments of Prof Christian Kastrop, a former ministry official, that Dublin was caught in bailout crossfire between Berlin and Athens.

As well as meetings in Berlin, Mr Donohoe participated in a podium discussion alongside federal finance minister Olaf Scholz. Mr Scholz, hoping to secure the leadership of the centre-left Social Democratic Party (SPD) in the coming days, told a Berlin audience he shared the criticism of French president Emmanuel Macron about the EU reform process.

Policy red lines

Greater momentum on European integration was needed, Mr Scholz said, requiring all member states to make sacrifices and cross policy red lines.

“We need more combined foreign policy and majority votes in the European council. We need more co-ordinated financial policy, with majority votes in the financial council,” he said, admitting they were not traditional German positions.

Speaking later, Mr Donohoe said he “would not support moving to qualified majority voting in key economic policy areas, particularly in the area of taxation”.

“I believe it is important that government maintain the right to make critical decisions in some areas for themselves,” he said.

Instead he flagged Ireland’s EU budget contributions as proof of its ongoing commitment to the bloc.

Mr Donohoe’s visit is the latest in a series of high-level visits from Ireland to Germany to identify and pursue common interests in the post-Brexit EU.

He held talks with senior cabinet members in Berlin over challenges facing the multilateral model, the need for the EU to agree a new industrial strategy and complete the banking union. Mr Donohoe said the bloc was in need of a new narrative explaining the EU as a source of European stability and prosperity.

On Wednesday Mr Donohoe will meet new ECB president Christine Lagarde in Frankfurt, while on Thursday, in Munich, Minister for Business, Trade and Innovation Heather Humphreys opens a new Enterprise Ireland office.

Solidarity

A key concern in all recent Irish visits to Germany has been to expand areas of co-operation and shore up solidarity with the EU’s largest state as the Brexit process enters a new phase.

Quizzed on the Berlin panel about the Irish role in taxing large tech companies based in its territory, Mr Donohoe said: “I believe large digital companies do need to pay more tax. I believe the way in which that needs to be done is through the OECD.”

Later he added that “change is coming in relation to corporation taxation at a global level, and that will influence landscape in which the EU makes its own policy decisions”.