THE EUROPEAN ECONOMICS COMMISSIONER has repeated his statement that Ireland will have to forego its status as being a ‘low tax’ nation if it is to regain control over its budget and survive the current funding crisis.
Rehn was speaking at Government buildings last night after meeting with finance minister Brian Lenihan, at which the Irish Times reports Rehn offered the Brussels analysis of the Irish fiscal situation and again asked for a comprehensive four-year plan outlining how the government planned to restore the deficit to under 3% of Ireland’s economic output.
His comments echo those issued last month in which he said it was ‘inevitable’ that the low-tax regime that had enticed massive foreign investment to Ireland would have to come to an end over the next decade.
RTÉ reports, meanwhile, that Rehn also called for cross-party consensus on the four-year strategy and on next month’s Budget, throwing the gauntlet down to opposition parties who – as recently as Sunday – had ruled out the prospect of allowing budgetary unanimity.
Crucially, however, there was no discussion of whether – and how – Ireland would require the help of the European Union in borrowing to run the country, with Reuters reporting that Rehn had instead shared a belief that the four-year budgetary plan would help to restore confidence in Irish bonds among foreign investors.
Rehn today meets the opposition parties, in meetings where he is expected to further lay out his case for cross-party consensus, as well as leaders from the Irish Congress of Trade Unions, the Irish Business and Employers Confederation, and Central Bank governor Patrick Honohan.
Irish bonds yesterday closed with investors demanding higher yields than ever before, finishing at 7.859% as investors baulked at the prospect of Ireland having to organise a default on its bond obligations.
The lack of investors willing to take on Irish bonds has led some senior Department officials to ask Brian Lenihan to propose legislative change that would allow the state to spend the National Pensions Reserve Fund buying up Irish bonds, in an attempt to boost demand.
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