TAOISEACH ENDA Kenny is coming under pressure from his euro zone partners to ensure that ongoing bank stress tests present a definitive assessment of their requirement for further financial aid.
Early this morning French president Nicolas Sarkozy told The Irish Timesthat he expects the summit to continue today without discussion of Ireland's corporate tax regime. "I don't think so, because they're waiting for the results of the stress test," he said.
With European talks on the interest rate on Irish bailout loans on hold pending the stress test results, diplomatic and official sources said Ireland’s sponsors in the euro zone have been insisting there should be no repeat of previous errors which hugely underestimated the banks’ need for new capital.
The pressure on Mr Kenny came as a crucial European summit in Brussels was dominated by Portugal’s debt crisis, which took a turn for the worse on Wednesday night when prime minister José Sócrates resigned. Although Mr Sócrates strongly denies it, many European countries now believe a bailout is inevitable.
EU leaders finalised arrangements for a permanent new bailout fund at their meeting last night while six non-euro countries -- Denmark, Poland, Bulgaria, Romania, Lithuania and Latvia - agreed to join a competitiveness pact originally designed for the single currency area.
EU Commission chief Jose Manuel Barroso told reporters said he was optimistic that these agreements were an “important aim” for those who want a stronger Europe.
“Economic and monetary union are finally walking on its two legs instead of limping along. There is still some work needed but the basic framework was adopted today by the 27 member states.”
As he arrived for the summit, Mr Kenny said he and European Council president Herman Van Rompuy agreed in advance of the meeting that it was better to postpone debate on about the interest rate until the result of the stress test s were was known.
“Obviously the stress tests for thebanks will not be concluded until next week,” Mr Kenny told reporters. “I think it is much more important to be absolutely clear about the extent of the liability before we have any further discussions or negotiations.”
Mr Kenny’s stance reflects the Government’s preference to have international attention deflected taken away from Ireland at this summit after his testy exchanges with French president Nicolas Sarkozy over corporate tax became one of the main talking points of the last EU meeting .
Amid clear indications of German frustration with Ireland’s stance on the bailout programme and bank rescue, sources briefed on the Government’s engagements with its European partners said Dublin was now under pressure to avoid “continual revisions” to either scheme.
“They don’t want to keep renegotiating the programme for Ireland. They don’t want to keep doing it over and over,” said a European diplomat.
Another diplomat acknowledged considerable frustration in Europe that Irish banks passed a stress test last summer only weeks before a large, unexpected recapitalisation in September. “It’s time to come clean. This is real politics now. No new prime minister can turn up with incorrect figures,” the diplomat said.
The postponement of final talks over the bailout costs all but scrapped expectation before the summit that that there would be any substantive return at this summit to Ireland’s contentious debate with France and Germany over corporate taxation.
In Berlin yesterday before she travelled to Brussels German chancellor Angela Merkel made it clear that she continues to expect a substantial quid pro quo from Mr Kenny in return for any interest rate cut.
“No - one in Europe will be left alone. No - one will be allowed fall , because Europe can only succeed together. But this requires, of course , . . . a sensible mix of self-exertion and solidarity ,” she told the Bundestag. “I can tell you, we’re not that far in the talks with Ireland.”
She also made clear her frustration over constant pressure on the euro zone from its weakest members. “I’ll be perfectly honest with you. I’d rather take care of Europe’s growing competitiveness than continually spend my time taking care of rescue programmes for other countries.”
A well-placed German source said there had been no talks between Berlin and Dublin since the last summit a fortnight ago . “Talking is the only tool we have at our disposal, but if someone doesn’t make use of this tool we can’t get anywhere,” the source said.
“With no concrete ideas, there are so many rumours coming out of Dublin at this stage that I [we] have had to stop
