DEMANDS for a common EU corporation tax base sparked a bitter clash between Angela Merkel, Nicolas Sarkozy and Enda Kenny as the taoiseach attempted to negotiate better terms for Ireland’s €85 billion bailout.
The German and French leaders insisted on changes to Ireland’s corporation tax rate, which is 12.5% compared with an EU average of about 23%, as part of any deal.
European leaders did, however, move to put an end to the international debt crisis by nearly doubling the size of the eurozone bailout fund. Policymakers gathered in Brussels to hammer out a new funding deal late on Friday. They agreed to cut the interest rate paid by Greece on its emergency loans, but Ireland’s bid for similar relief failed.
Kenny said: “I made it perfectly clear that the [common tax base] in my view was harmonisation of the tax rates by the back door and this would be detrimental to Ireland.”
The country has used the prospect of lower tax bills to lure companies such as Shire and WPP.
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The eurozone leaders agreed to increase the guarantees they provide to the bailout fund to allow it to raise capital on the money markets.
This will effectively raise the lending capacity of the so-called European Financial Stability Facility to €440 billion from the present €250 billion.
It should ensure the fund is big enough to bail out any more countries that need help. Portugal is considered most at risk of defaulting on its debts.
The leaders agreed to cut Greece’s interest rates of about 5% to 4%, as well as extending its repayment period to 7½ years from three years.
George Papandreou, the Greek prime minister, said this would save about €6 billion over the life of the loans.
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Last week, the single currency recorded its biggest five-day drop since the first week of the year, but the show of strength is expected to give it a boost when markets reopen.