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A dish best served cold
Mar. 14th, 2011 02:02 pmMerkel and Sarkozy got their long-awaited revenge on Ireland on Friday. Well, by "long-awaited", I actually mean "only since last November". For it was then that Ireland had to finance a rescue package for its effectively insolvent banking sector.
At the time the then PM Brian Cowen had the French and German leaders somewhat over a barrel. Sarkozy and Merkel wanted Ireland to raise its 12.5% Corporation Tax rate, a rate that the pair (rightly) believed had tempted some companies to move their tax domicile to Ireland and their headquarters to Dublin.
Cowen stood firm. "No surrender", he said (or perhaps, "ourselves alone!") and the bailout came through, mainly because Merkel and Sarkozy didn't really want to see what would happen if a bailout did not go through.
But an irritation remained. Cowen had accepted what I thought at the time were rather tough terms. The 5.8% rate on €85bn was, in simple terms, about €1,200 interest a year for every man, woman and child in the Republic. Protesters claimed (also rightly) that this was unsustainable. It needed to be renegotiated.
Enter Enda Kenny, a product of the regional politics that dominates Ireland and in this case part of the County Mayo mafia. Mayo is perhaps the county that has benefited most from the Celtic Tiger. An area that not 30 years ago was not far from a money-less economy had turned into one where you couldn't move for BMWs and the houses were going for near Surrey prices.
Kenny promised to renegotiate the terms of the interest on the bailout, and on Friday headed out to Brussels for a long meeting.
Seven hours later he came out, having suffered what must have been the most humiliating meeting of his life. Not only had Germany and France refused to relax the terms of Ireland's loan. That in itself would have been bad enough. But they had simultaneously agreed to relax the terms for Greece. They cut the rate to be paid from about 5% to about 4%, and extended the terms of the loan to 7 and a half years from three years..
Sarkozy, not one to miss a "don't fuck with me, pal" moment, then went on to say: "Greece has made major efforts, just look at the size of their privatization program. But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”
Kenny's major reaction was to head into what looks to me to be a serious state of denial. He claimed that new stress testing of Ireland's banks would show that Ireland shouldn't be paying such a high rate, and that a full summit on March 24-25 would agree with this. He seems to have completely missed the fact that Ireland could have the safest banks in the world and the highest capital reserves -- it wouldn't make any difference to Merkel and Sarkozy agreeing to soften the terms. They would rather say "if you are such a good bet, try borrowing the money from somewhere else and see how far it gets you".
++++++++++
There was a heart-rending tragedy in Japan had one moment on TV over the weekend that pushed up my admiration for the Japanese people by a factor of 10 or more. A husband and a father searches for his missing wife. The pain and worry that he is going through (for a wife, if truth be told, who was almost certainly dead) is etched into his face. The rescue centre he walks through is quiet. He knocks on a door and speaks to an old woman. She says, no, she isn't here, have you tried downstairs. The man says, quietly and politely, yes, he has. He thanks the woman and he steps back. He bows formally. He goes home, to wait. It said more about the Japanese character than any words could, and was unbearably moving. No screams of emotion, no masses of crowds fighting each other for rice as it's distributed from aid lorries (trying to get a bit more than they really need so they can sell the extra on at a profit). In other words, nothing like most other parts of Asia and most of Africa. This was an area that had been devastated to a degree almost beyond our understanding. And still they remained calm, focused, determined. It was impressive.
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At the time the then PM Brian Cowen had the French and German leaders somewhat over a barrel. Sarkozy and Merkel wanted Ireland to raise its 12.5% Corporation Tax rate, a rate that the pair (rightly) believed had tempted some companies to move their tax domicile to Ireland and their headquarters to Dublin.
Cowen stood firm. "No surrender", he said (or perhaps, "ourselves alone!") and the bailout came through, mainly because Merkel and Sarkozy didn't really want to see what would happen if a bailout did not go through.
But an irritation remained. Cowen had accepted what I thought at the time were rather tough terms. The 5.8% rate on €85bn was, in simple terms, about €1,200 interest a year for every man, woman and child in the Republic. Protesters claimed (also rightly) that this was unsustainable. It needed to be renegotiated.
Enter Enda Kenny, a product of the regional politics that dominates Ireland and in this case part of the County Mayo mafia. Mayo is perhaps the county that has benefited most from the Celtic Tiger. An area that not 30 years ago was not far from a money-less economy had turned into one where you couldn't move for BMWs and the houses were going for near Surrey prices.
Kenny promised to renegotiate the terms of the interest on the bailout, and on Friday headed out to Brussels for a long meeting.
Seven hours later he came out, having suffered what must have been the most humiliating meeting of his life. Not only had Germany and France refused to relax the terms of Ireland's loan. That in itself would have been bad enough. But they had simultaneously agreed to relax the terms for Greece. They cut the rate to be paid from about 5% to about 4%, and extended the terms of the loan to 7 and a half years from three years..
Sarkozy, not one to miss a "don't fuck with me, pal" moment, then went on to say: "Greece has made major efforts, just look at the size of their privatization program. But you can’t ask others to contribute for you, when you won’t make an effort on your tax receipts.”
Kenny's major reaction was to head into what looks to me to be a serious state of denial. He claimed that new stress testing of Ireland's banks would show that Ireland shouldn't be paying such a high rate, and that a full summit on March 24-25 would agree with this. He seems to have completely missed the fact that Ireland could have the safest banks in the world and the highest capital reserves -- it wouldn't make any difference to Merkel and Sarkozy agreeing to soften the terms. They would rather say "if you are such a good bet, try borrowing the money from somewhere else and see how far it gets you".
++++++++++
There was a heart-rending tragedy in Japan had one moment on TV over the weekend that pushed up my admiration for the Japanese people by a factor of 10 or more. A husband and a father searches for his missing wife. The pain and worry that he is going through (for a wife, if truth be told, who was almost certainly dead) is etched into his face. The rescue centre he walks through is quiet. He knocks on a door and speaks to an old woman. She says, no, she isn't here, have you tried downstairs. The man says, quietly and politely, yes, he has. He thanks the woman and he steps back. He bows formally. He goes home, to wait. It said more about the Japanese character than any words could, and was unbearably moving. No screams of emotion, no masses of crowds fighting each other for rice as it's distributed from aid lorries (trying to get a bit more than they really need so they can sell the extra on at a profit). In other words, nothing like most other parts of Asia and most of Africa. This was an area that had been devastated to a degree almost beyond our understanding. And still they remained calm, focused, determined. It was impressive.
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