Economic and Monetary Affairs committee chair Sharon Bowles has criticised the EU’s decision not to lower the interest rate Ireland pays on loans it received from the European Union in November’s bailout.
Last week, Eurozone leaders met in Brussels and agreed to strengthen the bloc’s €440bn rescue fund and lower the interest rates on Greece’s bailout loan by 1 per cent. It blocked the same reduction for Ireland because the Irish Government refused to raise corporation tax.
Corporation tax in Ireland is currently 12.5 per cent and French President Nicolas Sarkozy has described the rate as “shameful”.
German chancellor Angela Merkel told a press conference after the leaders’ meeting that it was “only fair” to renegotiate the bailout when “we get something in return”.
Bowles says: “The treatment Ireland is getting at the hands of Germany in particular is very un-European. This holier than thou attitude is unreasonable and Ireland does not deserve to be held to ransom.
“Merkel is making the Irish pay twice for their sins. Once to look after German banks because they are massively undercapitalised and exposed to Irish banks – which is why the Irish rescue packaged required a pledge to maintain the solvency of their banks – and then to make a tidy profit on the high interest.”
The EU and International Monetary Fund loaned Ireland £90m in November at an interest rate of 5.8 per cent. It has been reported the UK Government expects to make £400m profit from its £33.25bn bilateral loan to Ireland which had an interest rate of 5.9 per cent.
In January, Bowles said high interest rates on the loans to countries receiving bailouts meant rich countries would be making money from the loans and that struggling countries should get a rebate once they have paid their debt off in full.
She says: “I am asking Germany to play fair. By not doing so it means Ireland has even less incentive to keep up its debt repayments, which is no use as far as restoring confidence in the European economy is concerned and markets will recognise this.”