THE GOVERNMENT will battle to prevent any increase in the €6 billion adjustment proposed for the 2011 budget and the €15 billion target in the four-year plan as EU and International Monetary Fund (IMF) negotiators arrive in Dublin today to intensify talks on a rescue plan for Ireland.
As pressure builds from Europe for an immediate application for external aid, Dublin is campaigning to minimise any funding it draws down in a bid to ensure the terms are not too onerous. Negotiators on the other side are keen to determine the exact scale of the funding requirement for the banks.
Although the Government sought at first to draw a distinction between any emergency aid for the banks and for the State, there is a reluctant acceptance now that any funding for the banks will have to be drawn by the State. The Government will try to limit the size of the drawdown and the scale of outside involvement in wider economic management.
In the Dáil yesterday, Taoiseach Brian Cowen said the Government will “seek to protect our essential national interests and to ensure that the outcome is such that the country’s sovereignty and sovereign debt is not unduly imposed upon with a burden it cannot bear”.
Speaking at the Silicon Valley Comes to Ireland event in Dromoland Castle last night, Minister for Enterprise Batt O’Keeffe described the situation as being akin to a poker game.
“We’ve got to play poker over the next couple of days to see what cards these people have to play, what exactly they have in mind. We would like to see the colour of their money,” Mr O’Keeffe said referring to any offers of financial assistance from the ECB or IMF.
He also said the Government “almost had” European Commission approval for the outline of its four-year plan which would be finalised in the coming days.
A senior source said the Government believes any agreement to accept aid at this point would weaken its hand as the precise terms of an aid plan are being hammered out in the coming days. A further priority is to preserve the 12.5 per cent corporate tax rate, which is a central element of the four-year plan.
But pressure on that front is already emerging, even though Minister for Finance Brian Lenihan insists no change is in prospect. His Austrian counterpart Josef Proell said yesterday “there needs to be talks with the Government about this issue” whenever external aid takes effect.
Of chief concern in Europe was the Government’s refusal to accept an immediate intervention at a meeting two nights ago of eurozone finance ministers.
This has led to particular anxiety in the ECB where president Jean-Claude Trichet is worried about the weakness of Ireland’s banks.
“Trichet was very disappointed and even mad at the fact that the [Irish] minister was not prepared to start an immediate application,” said a European diplomat who was briefed on the proceedings.
While Germany and France are known to have backed the ECB, the diplomat said many but not all ministers who were at the meeting had concerns about Ireland’s stance. “There was a large degree of disappointment about that.”
European Commission chief José Manuel Barroso said the EU’s executive branch was “not putting any pressure on Ireland” but pointed to very specific problems with the Irish banks that must be settled. “This must be done speedily and decisively to pave the way for full confidence to be restored,” he said.
A well-placed diplomat said the main area of uncertainty as the talks step up is the scale of the liabilities in the banking sector and the element of “conditionality” that would be attached to any aid package.
The objective is for the EU and IMF negotiators to adopt a low-key “technical” approach to the examination of the banks.
“They really want to go and lift the lid over the books and see the big black hole.”
British chancellor George Osborne declared his government’s readiness to assist in any rescue scheme for Ireland.
His intervention – widely held to reflect concern about the impact of any deepening of the Irish banking crisis on UK banks – came as German finance minister Wolfgang Schäuble said Britain knew it had “special connections and obligations” towards Ireland as a neighbour.
“I won’t speculate on what kind of assistance we might provide. There are options, and we are looking at all of those,” said Mr Osborne.
The chancellor, who said he has held “a number of discussions” with Mr Lenihan on the situation, said British authorities were acting “entirely off our own bat” in its decision to signal support.
Meanwhile, Fianna Fáil backbencher Seán Power has called for a general election in the new year.
“It is important to give the people, as early as possible in the new year, an opportunity to pick in a general election a government that will give the country the fresh start that is badly needed and which it deserves,” he told the Dáil.
