The World from Berlin: Austerity Plan Could 'Stall the Irish Economy'

Part 2: 'Unfair Tax Competition Is Making Europeans Poorer'

A mural of Irish Prime Minister Brian Cowen and Finance Minister Brian Lenihan on a wall in South Dublin: Can or should the EU force the Irish to swallow the bitter medicine? Zoom
AP

A mural of Irish Prime Minister Brian Cowen and Finance Minister Brian Lenihan on a wall in South Dublin: Can or should the EU force the Irish to swallow the bitter medicine?

The center-left Süddeutsche Zeitung writes:

"The austerity plan will hit the inhabitants of this highly indebted country. Only one area has miraculously escaped: companies will still only pay around 14 percent tax on their profits. Good for the companies, bad for the Irish. And not just the Irish. The people of many EU states suffer from Ireland's unfair tax competition. Now that Ireland's hyper capitalism has imploded and the European neighbors have to rescue the country, this tax dumping has to end -- and Germany and France should make sure of this in the coming days."

"Ireland, Bulgaria, Latvia and Slovakia all attract companies with their low taxes. And at the same time they get billions in EU subsidies, financed by Germany, France and other countries from which they have lured the companies."

"This unfair tax competition is making Europeans poorer. If this development continues, then corporate tax could fall to 0 percent and the employees will have to finance police, schools and social welfare all on their own. Is this what the Europe of the future should look like?"

"It is time to introduce a minimum corporate tax in the European Union. This should be low enough to make Europe competitive internationally. A good level would be 20 percent, which would ensure that companies contributed to state spending from which they profit -- security, good streets and a well-educated workforce."

"Europe should not allow itself to make do with a lazy compromise in its negotiations with Dublin, which allows Ireland to remain a tax haven. Chancellor Merkel is avoiding direct confrontation. Yet the government in Berlin owes it to the people of Germany to take a stand against tax dumping."

The business daily Handelsblatt writes:

"Something that was not an issue with the Greeks or the Latvians has suddenly become one: the relationship between national sovereignty and European solidarity."

"A new government in Ireland could refuse the austerity measures negotiated with the EU.

"Can or should the EU force the Irish to swallow the bitter medicine? ... In Germany, the political will to protect the common currency, even if it requires actions that include financial support for a weaker member state, has prevailed."

"This principle goes both ways, however. There is also a duty to be loyal to the union. Could Ireland say that it is rejecting the EU's demands? That is hard to imagine. First of all, because of the threat of insolvency: Ireland would gain nothing if it had to go knocking on the IMF's door alone."

"The Lisbon Treaty states that member states should take the common interest into account in their economic policy. Every EU state had already given up part of its sovereignty and cannot now demand it back. However, the EU has to handle questions of national pride with care."

"Sure, theoretically Ireland has one defensive maneuver left: leaving the EU. However, that is about as likely as Bavaria leaving Germany."

The left-leaning Berliner Zeitung writes:

"What torments the Irish more than anything is the knowledge that they have squandered their prospects and their economic independence themselves. That was partly a false belief in the integrity of the banks that other countries, including Germany, also succumbed to. Above all there was the ruinous wheeling and dealing between bankers, developers and politicians that was considered part of the political culture."

"Fianna Fáil, the ruling party, has long had close ties with the business world. That caused the downfall of former Prime Minister Bertie Ahern two years ago when he resigned over allegations that he had shady dealings with property developers -- an accusation he denies. His popularity and that of his party didn't suffer as long the boom continued."

"The ignominy of having to go cap in hand to creditors has, however, destroyed trust in the country's two biggest parties, Fianna Fáil and Fine Gael. It is possible that the Labour Party will win the forthcoming election and that Ireland could see its first ever Social Democratic prime minister."

-- Siobhán Dowling

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