SUMMIT TALKS:TAOISEACH ENDA Kenny came under strong Franco-German pressure at his first EU summit late last night to dilute Ireland's closely-guarded corporation tax regime.
In office only since Wednesday, Mr Kenny met a "tough" reception as he made the case for substantial reduction in the interest rate on Irish bailout loans.
Diplomats observing the talks described very sharp "tit-for-tat" exchanges between the Taoiseach and French president Nicolas Sarkozy.
Diplomats also said that German chancellor Angela Merkel expressed scepticism about Mr Kenny's request.
"Corporation tax is now mentioned as a quid pro quo," said a source from third-party member state.
The source said Mr Sarkozy was quick to question why the Taoiseach was looking for a lower interest rate when it was open to him to raise Exchequer revenues by increasing the 12.5 per cent corporate tax rate.
"Sarkozy asked for a gesture on corporate tax. Kenny said I cannot give you a gesture on corporate tax. That led to a whole wider discussion," another diplomat said.
The French leader, who clashed who clashed with Mr Kenny's predecessor Brian Cowen at the last EU summit five weeks ago, pointed out to the Taoiseach that Ireland was receiving many billions of euro from its partners.
Mr Kenny had gone into the meeting insisting he was not prepared to increase in the Irish tax rate or to accept a common corporate tax base.
Ireland fears that a common tax base would dim the attractiveness of the Irish system by making it more difficult for international companies to allocate taxable profit to their Irish operations.
As midnight approached in Brussels, pressure on Ireland's corporate tax regime was emerging as one of the main talking points at meetings which began shortly before mid-day.
Dr Merkel, who is known to be pushing Ireland to harmonise the corporate tax base in return for a lower interest charge, is also said to have adopted a robust stance.
Diplomatic sources said as discussions on the euro zone crisis started that the chancellor saw no need to review Ireland's EU-IMF rescue package as the deal was made only in November.
Mr Kenny told euro zone leaders that the election of his Government represented a "fresh start" for Ireland, including in its relations with Europe.
The summit, just two days after Mr Kenny became Taoiseach, was seen as a critical opportunity for him to convince his counterparts of his resolve to bring Ireland's financial crisis to heel.
