Irish bid to ease terms rejected

Euro zone leaders rebuffed Irish Prime Minister Enda Kenny’s bid for easier bailout terms, demanding Ireland raise tax rates in return, as they rewarded Greece with a cut in its rescue-loan costs.

“We weren’t really satisfied with what Ireland pledged,” German Chancellor Angela Merkel said after a summit that ended about 1:30 am in Brussels. “We can only offer the interest rate cut when we have something in return.”

Arriving for his first summit as Ireland’s leader, Kenny refused to buckle under pressure from Merkel and French President Nicolas Sarkozy as he pushed for relief on the 5.8 per cent interest rate the country pays on the ¤85 billion ($115 billion) rescue package it received in November.

On raising the tax rate, Kenny said, “I made it perfectly clear on many occasions that this is not something that I could or would contemplate and didn’t this evening,”. He said talks would continue through a summit scheduled for March 24-25.

Ireland’s main corporate tax rate is 12.5 per cent, compared with an EU average of about 23 per cent and even higher rates in Germany and France. It has used the same to lure companies such as Hewlett-Packard Co to set up base in the country.

“We’re not asking Ireland to put up their corporate taxes to the European average. But, they should make some effort,” Sarkozy said.

As for Greece, which now pays about five per cent on loans in its ¤110 billion rescue program, euro zone leaders agreed to cuts the rate by one percentage point and extend the maturity to 7 ½ from three years.

“Greece has made major efforts, just look at the size of their privatization program,” Sarkozy said. “But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”