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Kenny feels heat as EU shows no mercy on bailout

ENDA KENNY faces the first real challenge of his leadership on Friday after EU finance ministers conceded little to Ireland in the latest talks.

Germany and France remain defiant against lowering the interest rate on the Irish bailout -- unless the new Coalition is willing to offer substantial sacrifices.

However, Fine Gael MEP Gay Mitchell today accused the French and German leaders of putting their own party politics ahead of the common good.

"The European Union has been, is, and will continue to be, our best friend," he said.

"The problem we have is that Sarkozy is running in third place behind Le Pen in the opinion polls in France and Ms Merkel is under pressure, not just because of rolling regional elections, but also challenges to her constitutional right to fund some of the things she is funding."

Mr Mitchell said that Irish people have to "understand those" when waiting for news on whether concessions will be granted. Finance Minister Michael Noonan left Brussels empty-handed last night after EU partners showed little willingness to cut the punitive 5.8pc interest rate.

The Cabinet was set to meet today to discuss what strategy it will pursue ahead of the two-day summit of EU leaders on Thursday and Friday.

A line of ministers have continued to insist that there is no way that Ireland's 12.5pc corporate tax will be placed on the negotiating table. But Germany's finance minister warned that Mr Kenny should come with something tangible if the interest rate is to be adjusted.

"When someone wants to change a contract which he has just agreed to, then he has to think not only about what the other party to the contract should change, but he must also come up with suggestions about what he can change himself," Wolfgang Schaeuble said.

Insisted

Despite this, European Minister Lucinda Creighton said that there was some "very positive vibes" from some nations.

And Gay Mitchell insisted that we "can't put it right all on our own".

"I would be surprised if out of that (summit) does not come an opportunity to recapitalise the banks and do a deal on the interest rates," said Mr Mitchell.

Michael Noonan confirmed that Ireland is ready to make some concessions, including a legislative brake that would prevent the Government from going outside a prescribed percentage deficit limit.

As the Irish issue was pushed to the sidelines last night, EU finance ministers did agree a new €700m rescue fund to fight future debt crisis.

The permanent fund will sit in place to help countries that may end up in a situation like Ireland after 2013. It will enable countries to default on their debts in a controlled way and negotiate with creditors.