EUROPEAN DIARY:The bailout has fundamentally changed Ireland's relationship with its EU partners, writes ARTHUR BEESLEY
WHATEVER THE outcome of the turmoil in Fianna Fáil, the affair is being closely watched in Brussels. Not due to any particular interest in Brian Cowen’s fate but because the Finance Bill, which gives effect to the budget, has yet to be enacted. Any failure on that front would spell trouble on a grand scale for the bailout.
For the moment, no-one here is saying anything publicly. When questioned yesterday about the ructions in Dublin, the spokesman for economics commissioner Olli Rehn declined to comment but said the EU-IMF programme was on track. But any delay, something which cannot be ruled out in the present volatility, would be certain to trigger a change of tone. Multi-billion euro loans are not lightly given in this milieu – and it is clear that the budget is a core element of the rescue deal.
This is well-recognised in Dublin. In some parts of Fianna Fáil, any derailing of the Bill would be seen as something approaching national self-immolation in terms of Ireland’s battered credibility. Close observers of Ireland in the EU institutions hold a similar view. While there is little at this point that Cowen’s administration can do to restore Ireland’s reputation, that’s not to say further damage cannot be done.
All of this aptly underscores the extent to which the bailout has fundamentally changed Ireland’s relationship with its European partners. The terms of engagement have changed. They are on the hook for us now and we cannot forget that.
Were Irish dealings in Brussels even a remote consideration when previous Fianna Fáil leaders came under pressure? Then, no. Now, yes.
This is true across the board, despite claims that the rescue package has not infringed Irish sovereignty. It has and it will.
In Toulouse last Thursday, for example, French president Nicolas Sarkozy took aim anew at Ireland’s corporation tax regime. There was nothing particularly fresh in his remarks – he has made his argument many times before – but they are not without political moment. Sarkozy is a key player in the debate on EU economic governance. Anything which suggests he sees ill of core Irish policies has potency.
In a scenario in which the Opposition parties in Dublin are crying out for a fundamental renegotiation of the bailout, it can be noted that its terms can be disimproved or improved.
Sarkozy’s intervention has resonance, too, as debate starts in earnest on the possibility of lowering the interest rate on bailout loans. A high-level source said there was some sympathy in Brussels for the argument that penal interest could hamper Ireland’s recovery. A further consideration, said another, was the sense that expensive loans serve to undermine support in Ireland for Europe.
In question, however, is the extent to which Ireland’s lenders are willing to contemplate a reworking of the interest rate. Resistance at present is perceived to centre on Germany and the Netherlands, with the French position unclear. Thus there is all the more reason to take note of Sarkozy’s intervention.
That’s not to say Paris will inevitably get its way on this question. After all, the Government successfully fought off a Franco-German challenge to the corporate tax rate when the original bailout deal was done in November. It intends to proceed in this fashion. At an EU meeting in Budapest last Friday, for example, Minister of State for Europe Dick Roche said Sarkozy was free if he wished to reduce the French tax on corporate profits to 12.5 per cent.
In much the same fashion, the Government is campaigning against moves to develop pan-European rules on the calculation of business taxes.
Whereas the bailout has obvious implications for the strength of the Irish argument against a common consolidated corporate tax base, the Government is resolved to forge an alliance with like-minded countries. Attention now centres on persuading Poland, the Baltic countries and Portugal to join with Ireland.
This is the stuff of the daily grind in Brussels, forging political alliances and leveraging friendship. Post-bailout, however, it is a given that Ireland’s clout is as diminished as its finances. That is the prism through which the battle for the Fianna Fáil leadership is seen.
Pass the Finance Bill, they say here. Do it quickly.