Germany May Back Bailout Cut if Ireland Raises Corporate Tax

Tax hike may open door for renegotiation of rescue package terms

Michael Meister, the deputy parliamentary leader of the Christian Democrat party in Germany, said Friday that if Ireland would raise its corporate tax, Berlin might support a renegotiation of the cost of Dublin’s bailout package.

According to a Reuters report, Meister, a member of Chancellor Angela Merkel’s party, made the statement while also saying that Ireland’s risk profile would have to be lowered in order to cut interest rates on the bailout. "A small rise in Ireland's lower than average corporate tax rate" might allow the possibility for renegotiation, he said in the report.

On Wednesday Fine Gael’s Enda Kenny, Ireland’s new prime-minister-in-waiting, was reported to be ready to press Merkel on renegotiation of the terms of the rescue package, although Merkel had said that Europe couldn’t "artificially reduce interest rates"; there were benchmarks to be considered, and Ireland couldn’t expect to pay less than Portugal.

Kenny intended to broach the matter in Helsinki on Friday nonetheless at a meeting of the European People’s Party; he also expected to get a private meeting with Merkel to discuss the bailout, but a German government source cautioned against that, citing tight scheduling. "In Helsinki there is very little time for any bilateral meeting. So it is not certain that a meeting with Kenny will be possible," the source was quoted as saying.

The International Monetary Fund (IMF) had said in Washington during the night that because of changes in member countries’ subscriptions and voting shares that took effect on Thursday, the IMF’s portion of Ireland’s rescue package would see a reduction in interest rates.

Meister co-authored a policy paper from his party that is urging Merkel to stick to her hard line regarding the possible strengthening of the European Financial Stability Facility (EFSF). Merkel has been opposed to any increase in the bailout fund, while others in the European Union (EU) have spoken out in favor of it.

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