WRAPUP 4-Irish corporate tax in focus as bailout deal nears

* Cost-cutting measures to be set out Tuesday-Irish Times

* Sources expect financial aid package soon afterwards

* Sarkozy expects Dublin to raise corporate tax rate

(Adds poll, union leader)

By Julien Toyer and Jodie Ginsberg

LISBON/DUBLIN, Nov 20 (BestGrowthStock) – French President Nicolas
Sarkozy said on Saturday he expected Ireland to raise its
corporate tax rate but added that an increase would not be a
condition for any bailout.

International Monetary Fund and European Commission
officials are in Dublin to discuss financial aid to help Ireland
cope with its struggling banks, whose huge liabilities have sent
Irish borrowing costs soaring.

The main concern for EU policymakers is that Ireland’s
problems will spread to other euro zone members with large
budget deficits such as Spain and Portugal, threatening a
systemic crisis.

Euro zone states want Ireland to raise its 12.5 percent
corporate tax rate as part of any deal but Dublin argues the low
rate is crucial to attracting foreign investment.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro zone debt struggles with debt: http://r.reuters.com/hyb65p For multimedia coverage on the Euro Zone Crisis page on Top News: http://r.reuters.com/hus75h For Reuters Insider TV show: http://link.reuters.com/jar85q For analysis on how bank bailout would work [ID:nLDE6AF21W] For factbox on Irish bank debt [ID:nLDE6AH1G6] BREAKINGVIEWS opinion on Irish bank funding [ID:nLDE6AI0FX] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Sarkozy, speaking at a news conference in Lisbon on the
sidelines of a NATO summit, said he expected Ireland to raise
its corporate tax rate.

“It’s obvious that when confronted with a situation like
this there are two levers to use: spending and revenues,” he
said. “I cannot imagine that our Irish friends, in full
sovereignty, (would not use) this because they have a greater
margin for manoeuvre than others, their taxes being lower than

“In the conditions for activating the (bailout) mechanism,
there are no fiscal demands,” he added.[ID:nPISKME6H3]

The Irish Times newspaper reported that Ireland’s four-year
plan to reduce its deficit would be published on Tuesday, before
any international financial aid package was ready.

Last month, Ireland doubled to 15 billion euros ($21
billion) the sum it calculated was needed to bring its deficit
under control by 2014. Finance Minister Brian Lenihan said this
was designed to ensure Ireland would not need a bailout but it
failed to calm jittery markets.

Ireland’s central bank chief acknowledged this week the
country needed a loan running into tens of billions of euros to
shore up a banking sector that has grown dependent on ECB funds
and seen an exodus of deposits over the past six months.


The Irish Times said the government — deeply unpopular and
hanging on to a tiny parliamentary majority — had pushed
forward the publication date for its four-year plan so it could
be identified as a programme drawn up by the government rather
than one driven by the European Union or the IMF.

The newspaper said the plan would be published on Tuesday,
citing unnamed senior Irish officials. A government spokesman
said only the plan would be published early next week.

An international aid package is expected to be announced
shortly afterwards.

“The cabinet will meet tomorrow to sign off on the 160-page
document which charts how the state will reduce its outgoings,”
the Irish Times said, adding a separate plan for restructuring
the bank sector was also expected to be finalised this weekend.

Sources have told Reuters that Ireland may need assistance
of between 45 billion and 90 billion euros, depending on whether
it needs help only for its banks or for public debt as well.


Markets calmed in recent days after it became clear Ireland
was on track to receive aid, but remained jittery on Friday.

The euro briefly pushed above $1.3720, but fell back to
$1.3660 in late European trading. The spreads of Irish 10-year
bonds above German benchmarks drifted down towards 5.4
percentage points before pushing back up to 5.6 points, dragging
Greek, Portuguese and Spanish debt alongside. [GVD/EUR]

ECB policymaker Lorenzo Bini Smaghi told the weekly Die Welt
am Sonntag that the costs of any bailout could increase if
Dublin needs financial aid but delays in asking for it.

“This risk in fact grows with time — we have seen this
already with Greece. There is also danger that contagion spreads
to other highly indebted euro zone countries,” he said.

“If the financial markets see that Europe is having a hard
time to resolve a problem quickly, they could seek out a new
victim,” he added.

Britain repeated its readiness to help because of its strong
economic links with Ireland and Sweden said it could help too.

“There could be some bilateral help. We are waiting to hear
more from the Irish government,” Swedish Prime Minister Fredrik
Reinfeldt told RTE.

“We feel that we are very close to Ireland and are always
ready to listen and help if we can do so,” he said.

Funds for Ireland are likely to come from a safety net fund
set up after the EU bailed out Greece earlier this year.

Prime Minister Brian Cowen’s razor-thin parliamentary
majority could be cut even further if, as expected, his Fianna
Fail party loses a seat in a special election next week.

Support for Fianna Fail has fallen to 17 percent, according
to a Sunday Business Post/Red C poll, a result that would cost
the party more than half its MPs if repeated in a general

Union leaders said the public was already angry over the
government’s austerity cuts and any further measures to be
announced on Tuesday could prove a tipping point.

“The talk now is of the budget, and effectively destroying
the social welfare system. I think there is going to be huge
civil unrest as a result of that,” TEEU union leader Eamon Devoy
told Reuters.

Unions plan a Nov. 27 protest march against austerity
measures imposed to rescue the state’s finances and one has
called for a campaign of civil disobedience if the government
fails to call an election.
(Additional reporting by Lorraine Turner in Dublin and Emmanuel
Jarry in Lisbon; editing by Jon Boyle)

WRAPUP 4-Irish corporate tax in focus as bailout deal nears