The Irish Bank Sandwich: Time for the EU to face up to reality

It is hugely ironic that President Sarkozy called last week for Ireland’s corporate tax rate to be increased, as some sort of quid pro quo of the EU-IMF loan to Ireland. It is ironic, because it completely misses the point of who’s doing who a favour. Let’s leave aside, for the moment, the fact that the rate is a huge revenue raiser, that such things are a sovereign right and that Ireland is not being picked on for its low rate but for the fact that its rate is clear. (Other countries in the EU have effective rates than go lower than Ireland’s, depending on the FDI deal being dangled.)

One could certainly understand Mr. Sarkozy’s pronouncements if France and the other EU member states were gifting Ireland a large amount of money – some give and take would be expected. But what has happened is something designed to be a win-win for France, Germany and other EU states. Not only do their banks – the bondholders of the Irish banks – get off scot-free, while Irish taxpayers foot the bill, they as European governments earn a tidy little profit from the interest rate differential, middlemen between the markets and Ireland. In that context, the irony is the general perception that European taxpayers are helping to bailout Irish banks, while it is in fact Irish taxpayers helping to bailout European banks. [...]
Ronan Lyons