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Kevin Doyle: Kenny needs to raise his game in EU high stakes poker over bailout terms

A WEEK ago Fine Gael painted a picture of Enda Kenny staring down the EU overlords in a defiant moment that would set the tone for his leadership.

Unfortunately, the image witnessed by observers from outside Ireland was one of the new Taoiseach being roughed up on his first day at school.

Across Europe the showdown was reported as the French and German big boys making sure the Mayo man knew who was boss.

There is a high-stake game going on in Europe at the moment. They hold us over a barrel because essentially they control the credit card.

However, we cannot be easily ignored because if we refuse to do our homework then the whole EU class faces long-term financial detention.



bullying

So on Thursday, Enda goes back for round two with French President Nicolas Sarkozy who is fast becoming a bullying headmaster.

And German Chancellor Angela Merkel -- who was so helpful to Kenny during the election campaign -- now wants the Taoiseach to repay the compliment to her.

While she provided a nice photo opportunity for Enda, the payback she has requested is even more punitive than the 5.8pc interest rate charged on the Irish bailout.

The less-than-dynamic duo of Sarkozy and Merkel are losing domestic battles and want Ireland to take the fall for them.

MEP Gay Mitchell pointed out this morning how Sarkozy is being thrashed into third place in French opinion polls behind Marine Le Pen's far-right National Front, while Merkel has election issues of her own.

Therefore they have to keep one eye on home matters while trying to deal with the pesky Irish.

It is for that reason that they want Kenny to effectively sign off on our 12.5pc corporation tax rate.

It would be a major coup for them to return to their electorate but if he gives in Kenny need not bother returning to Dublin anytime soon.

The Taoiseach spent most of last week assuring anybody in Washington who would listen that our tax rate would not and could not be changed.

It should be obvious that the best chance of expediting the Irish recovery comes from our ability to attract foreign investment.

But in reality do the French or Germans really care all that much about the Irish situation?

As the latest edition of The Economist magazine points out: "The eurozone talks of competitiveness, but seeks to deny Ireland its competitive advantage.

"It thus gives the impression of disliking internal competition, treating low taxes to attract foreign companies as an evil to be exorcised, not a virtue to be emulated."

Our ministers have been keen to stress that while on paper our 12.5pc rate might seem lower than our competitors, in real terms the French actually offer a selection of exemptions or incentives anyway.

A compromise could be that Kenny agrees to a 'common consolidated corporate tax base' (CCCTB) that would allow companies trading across Europe to set losses in one country against profits in another.

In order to get the 1pc reduction on the bailout interest rate he may also have to make an empty promise to engage with other member states on the issue of tax co-ordination.

Provided Kenny stays strong down the road then engagement does not have to mean anything more than talks.

Finance Minister Michael Noonan has also said he might be prepared to enter an agreement on a 'debt brake' which would curb our annual spending. That should be no big deal since the EU/IMF deal has squeezed the life out of our Exchequer anyway.

As a country we really need to get some concessions from this week's EU summit.

Now that Kenny's in the big league he needs to avoid fist-fights and instead outsmart Sarkozy and Merkel.

kdoyle@hnews.ie