Ireland will not have to raise its corporate tax rate

Ireland will not have to raise its corporate tax rate as part of an EU rescue plan, French President Nicolas Sarkozy, said, addressing an issue that has emerged as an obstacle to an agreement of support.

"When you have to face a deficit, it has two levers, spending and taxes," Sarkozy said in Lisbon today at a summit of NATO leaders. "I can not believe that our Irish friends, in full sovereignty, will not be both, since they have more room to maneuver, since their tax rates are lower. But that's not a demand or a condition, just an opinion .

Irish leaders have said they will fight to maintain a 12.5 percent tax on businesses, which helped to make Ireland a destination for investment by companies like Microsoft Corp. and Pfizer Inc. The Austrian Finance Minister Josef Proell and Economic and monetary union, Olli Rehn, have indicated that the rate may be increased to the level of the continental nations, as part of the bailout.

Rehn said Nov. 8 that "Ireland will not continue as a low-tax country."

Irish officials and experts from the EU and the International Monetary Fund are working through the weekend in Dublin, a race to complete a grant agreement and avoid a decline in the markets.

Allied Irish Banks Plc, the second largest bank in Ireland, highlighted the fragility of the financial system yesterday, reporting a decline of 17 per cent of deposits this year. IMF Managing Director Dominique Strauss-Kahn said Europe is moving "too slow" to resolve the sovereign debt crisis that began in Greece.

'Grim' Out

The output of Allied Irish deposit "looks bleak," said Alan McQuaid, chief economist at Bloxham Stockbrokers in Dublin. "This underscores the urgency of the situation and the need to reach a solution. A great package is needed to reassure the markets."

Aid talks began two days after a meeting of finance ministers from the EU calls on Spain to accept a package within days. The plan, which will focus on banking sector recovered from the property fall 2008, can add up to 100 million euros (136 billion U.S. dollars), according to Barclays Capital.

Investors dumped Irish bonds this month on concern about the country's ability to keep its financial system afloat. They compared some of the losses when the Prime Minister, Brian Cowen, left's refusal to seek help. Finance Minister Brian Lenihan said on 18 November it was clear that the country needs the help that banks had become "unmanageable."

The premium investors demand to hold bonds Irish 10-year German benchmark bonds rose three basis points to 544 basis points yesterday. The spread, a measure of the risk of investing in the debt of Ireland, fell from a record 646 basis points on November 11 as investors anticipated a rescue.

Cowen Campaign

Amid the talks, Cowen campaign in Donegal in northwest Ireland before November 25 election to fill a vacant seat. The vote threatens to erode most Cowen. He has the support of 82 legislators, including independents, compared with 79 for the combined opposition.

Lenihan said this week they would welcome the creation of "a significant equity financing of emergency" for Irish banks and Irish officials said they resist any demands by the EU to increase revenue by increasing corporation tax.

Ireland's Trade Minister Batt O'Keeffe said this week the company tax rate is not "negotiated."

German Chancellor Angela Merkel, today sidestepped the question of whether the tax was in danger if Ireland played the bailout fund.

"Every country that is in need of this mechanism can be used," he told a conference in Lisbon. "All that is beyond the decision of each country."

Budget cuts

A 2011 budget, which debuts on December 7, may placate investors worried about a budget deficit to be approximately 12 percent of gross domestic product this year, or 32 percent when the bank bailout costs include .

Irish lenders have become more dependent on the financing of the European Central Bank after being frozen wholesale markets. The amount of loans from the ECB to the country's banks increased 7.3 percent to 130 million euros in October from the previous month.

Allied Irish has tripled its dependence on central bank finance and late June as deposits fled. dependence on bank "monetary authorities' increased to 27 million euros in a" high single digit "number of one billion euros on June 30, Alan Kelly, general manager corporate services group at Allied Irish said a telephone interview yesterday.

Irish banks failure to wean off the lifeline of the ECB announced that the EU authorities to intervene in an effort to stop the crisis before it spreads across the euro region.

"The current view seems to be whether Ireland will accept bailout funds, at least for the banking sector, which could help fend off any move by the bond vigilantes to go to Portugal," said James Shugg, an economist with Westpac's London headquarters Banking Corp.