Wednesday, June 8, 2011

Sarkozy bullies Ireland on Interest rate and shames France (Sarkozy est un tyran)

Sarkozy behaves more like a political pygmy than a statesman

IRELAND is being overcharged -to the tune of 3% -on the interest rate imposed by its European partners on its €85 billion bailout package negotiated by the outgoing FF government. The EU is profiting from Ireland’s misery. The new government has sought a modest 1% reduction in the interest rate. However it has run into strong opposition from Germany and France. German opposition appears to have softened somewhat.

However the behaviour of Sarkozy President of France is preposterous. The French are prepared to veto a 1% reduction unless Ireland increases its 12.5% corporation profits tax. To a certain extent this tax rate compensates for the fact that Ireland is an island on the periphery of Europe and thus has higher transport costs. The low tax rate has aided the attraction of foreign industrial investment to the country. Notwithstanding this Ireland has a 15% unemployment rate and a large debt burden. Sarkozy is endeavouring to bully a small country into submission all in the interests of political expediency. He faces the French electorate in a presidential election in 2012. So he seeks to impress the voters by trampling on a small nation’s rights. What a brave little man. Now of course Sarkozy will not pick a row with a large power like China . No he much prefers to bully a small country of 4.5 million people on its knees economically. Sarkozy is engaging in hypocritical posturing as France uses various strategies to reduce its real level of Corporation Profits Tax. He promised in the course of the Nice Treaty referendum re run that Ireland’s corporation profits tax would not be altered if the country passed the treaty. So Sarkozy is not alone a cynical political schemer but also untruthful. He has disgraced the French people by his antics on this issue. He is behaving more like a political pygmy than a statesman

FINANCE Minister Michael Noonan has warned France that our corporation tax rate is not up for negotiation. Under no circumstances can Ireland yield on this. To do so would be to commit economic suicide. If this were to occur foreign companies would pull out of Ireland. The EU could then whistle goodbye to its money. France would lose out. Indeed the Euro could collapse .

Sarkozy is threading on thin ice. He apparently wishes to sabotage the Irish economy. He is playing with fire all in the interests of his own reelection

Perhaps he might care to ponder on the following: If you owe the bank €100, that's your problem. If you owe the bank €100 million, that's the bank's problem. Bury the Irish economy Mr Sarkozy and the Irish debt becomes your problem.

Failure by Germany and France to treat Ireland fairly will ultimately cost both countries their economic prosperity as the Euro and some large German banks collapse. Malheureusement Sarkozy est un nain politique. Oh for the days of  a Helmut Kohl or a Willy Brandt or a Konrad Adenauer.


Kate said...

The unemployment rate is very concerning. I found this article dated April 1, 2011 that reports the official unemployment rate for those under 25 is 24.2%.

John Barry said...

That is correct.Ireland's birth rate is high by European standards.

Kate said...

Okay, so this article says this is the second highest rate in Western Europe and you say there is an age bubble compared to the rest of Europe. That makes me wonder the time scale then, both of population size and long term trends for employment?

...and for clarification's sake,the US Bureau of Labor Statistics puts the US unemployment rate for ,/+ 25 yo at 19.1% in July 2010.

Apparently both our countries are poised to (abnormally for western nations) sacrifice perhaps up to 1/4 of this generation to the financial crisis?

Kate said...

Oh and sorry for going on about this, but I'm sincerely more curious than I am educated.

John Barry said...

Not alone had Ireland a baby boom in the 80s and 90s but government policy from around 2002 to 2007 involved too many tax concessions for property development. This fueled a colossal property boom aided by cheap EU interst rates. This resulted in artificially reducing the unemployment rate by 200,000. 200,000 building workers have now lost their jobs since the crash in 2007/2008. Thus the unemployment rate has rocketed once more. These are generally unskilled and not trained for other forms of employment. Too much emphasis was put on building and not enough on setting up viable new businesses. The economy must now be rebalanced. This will be very painful especially as the last government made a huge blunder by guaranteeing the banks.
This has added 70 billion euro to the national debt (100 billion US dollars). In addition it left a 19 billion Euro budget deficit.
The fact of the matter is that Ireland must build up the small business sector. This can generate jobs. However it will be long and hard. The new government must take very hard decisions.
It must free up the labour market. There are too many restrictive practices and too much red tape.
It must seek to retrain the unemployed many of whom neglected their studies in favour of jumping into the building industry where wage rates were huge. The problem is that the country is badly strapped for cash.
The US faces similar difficulties as far as I can see.