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Kenny turns down cut in bailout cost to save crucial tax rate

TAOISEACH Enda Kenny refused a chance to cut the interest rate on the Irish bailout by 1pc today after fraught EU negotiations.

The newly appointed leader played hardball with France's Nicolas Sarkozy and Germany's Angela Merkel who offered the reduction on condition that he dilute our corporation tax rate.

During a heated meeting that went on into the early hours of today, Mr Kenny resisted pressure to restructure our regime.

He called for a substantial reduction in the interest rate on the EU/IMF bailout terms but insisted he would not give anything away on our corporation tax rate or base.

"It wasn't possible to reach a deal for Ireland this evening," the Taoiseach told reporters shortly before 2am today.

Swapping concessions on the interest rate for Ireland's bailout package -- a 1pc cut in the interest rate would save Ireland €600m a year -- proved to be a deal too far from the point of view of Mr Kenny.



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He said there was acceptance of the principle of an interest rate cut of 1pc but that he was not prepared to yield any concessions on corporate tax in return for that.

There was "tough talking" at the summit as Mr Kenny came under pressure on Ireland's 12.5pc corporation tax rate from Europe's heavy hitters.

Attending his first EU summit, Mr Kenny clashed with France's President Nicolas Sarkozy after the Frenchman described Ireland's corporation tax regime as "shameful".

"Strong words" were said to have been exchanged between the two with the French government said to be pressing for Ireland to be flexible on the queston of a common corporate tax base in exchange for flexibility on the terms of our EU/IMF bail out.

Mr Kenny later acknowledged a "good, vigorous and vibrant debate" with Mr Sarkozy, but said he would not characterise it as a "Gallic spat".

One source said Mr Sarkozy questioned why Mr Kenny was looking for a lower interest rate when he could raise exchequer revenues by increasing the 12.5pc tax rate.

mlavery@herald.ie