This is Thursday’s edition of our new Brussels Briefing. To receive it every morning in your email in-box, sign up here.
Mr Kenny with Irish president Michael Higgins after formally dissolving parliament Wednesday
To date, no eurozone leader who has guided his country through a bailout has emerged politically unscathed on the other side. Portugal’s Pedro Passos Coelho was deposed as prime minister in November after inconclusive general elections. Earlier last year, Greece’s Antonis Samaras suffered a similar fate at the hands of leftist Alexis Tsipras. And Spain’s Mariano Rajoy is looking increasingly unlikely to win back the premiership in Madrid after informing King Felipe VI this week that his coalition-building efforts were going nowhere. Can Enda Kenny end the losing streak?
The Irish prime minister asked for parliament to be dissolved yesterday, setting the stage for a three-week sprint to election day on February 26. Mr Kenny is already touting his economic record, and to any outsider, that would seem to be enough to put him over the top. Ireland is expected to be the fastest-growing economy in the EU in 2016, which would be the third year running. Its unemployment rate of 8.6 per cent, while still high, is lower than the eurozone average and well below the 14.7 per cent rate when Mr Kenny assumed office in 2011.
Despite that record, opinion polls have stubbornly shown his Fine Gael party unable to get much above 30 per cent, a good-sized decline from the 36 per cent they took in the last general election. More troublingly for Mr Kenny is the demise of his coalition Labour party, which has seen its support cut in half. Without Labour, it’s unclear who Fine Gael would go into coalition with – which could produce a similar result to that faced by Mr Rajoy and Mr Passos Coelho, who emerged from their elections atop the largest party, but one too small to cobble together parliamentary majorities. Read more
Welcome to the Wednesday edition of our new Brussels Briefing. To receive it every morning in your email in-box, sign up here.
Apple's campus in the Irish town of Cork
For the first time since the so-called LuxLeaks scandal broke more than a year ago – where documents leaked showing hundreds of multinationals had received extremely favourable tax treatment in Luxembourg – the issue of corporate tax avoidance has suddenly moved back into the spotlight thanks to actions taken by both London and Brussels to begin clawing back millions in allegedly underpaid taxes.
Tomorrow, Pierre Moscovici, the former French finance minister who now oversees tax issues for the European Commission, is due to unveil the latest in a series of measures aimed at cracking down on “sweetheart” tax deals. Mr Moscovici’s task today will be as much political as financial, since his boss Jean-Claude Juncker was Luxembourg prime minister when the LuxLeaks deals were struck and has suffered some political damage as a result.
Alex Barker, who long covered corporate tax issues for the FT Brussels bureau, has tallied up the windfall for treasuries thus far and asks whether the headline numbers, which seem big, are actually that big at all:
The long suffering European taxman is looking for redress. Over the past three months alone roughly €1.25bn has been clawed back from multinationals across the EU, led by the European Commission’s series of cases brought against companies in Belgium, Luxembourg and the Netherlands, which Mr Moscovici will no doubt tout today. It all sounds impressive. But scratch the surface and an enduring truth becomes clear: tax collectors are usually more hampered by European politics than helped.
Jean-Claude Trichet, right, with the parliament's economic committee chair, Sharon Bowles
The troika of bailout lenders has not been getting much love at the European Parliament’s ongoing inquiry into its activities in recent weeks. But the criticism is not just coming from MEPs in the throes of election fever. Predictions of the troika’s demise have come from some unexpected quarters, including current and former members of the European Central Bank executive board.
During the hearings, MEPs have particularly criticised the troika — made up of the International Monetary Fund, European Commission and the ECB — for its overly optimistic growth forecasts for bailout countries, which have been repeatedly revised downwards. Perhaps unsurprisingly, they have also suggested that the troika be subject to greater parliamentary oversight.
Hannes Swoboda, the Austrian social democrat who heads the centre-left caucus in the parliament, went further, saying the body is undemocratic, hostile to social rights and that the EU would be better off without it. Read more
Mario Draghi, left, stands next to Noonan at last week's finance ministers' meeting
Given the eurozone crisis has, for more than a year, failed to seriously rankle the financial markets, those of us still preoccupied with its aftermath and how it is changing Europe can occasionally feel like a small band of obsessives offering up Talmudic pronouncements of interest to a dwindling number of fellow crisis junkies.
But occasionally one of those textual debates rises to the level of importance that’s worth the attention of a broader audience. And one of those occasions seems to have occurred over the last couple of weeks regarding Ireland and the European Central Bank’s bond-buying programme, known as Outright Monetary Transactions (OMT).
For those who haven’t been following this obsessively, the discussion is important because most officials and market analysts credit OMT with, essentially, ending the hair-on-fire phase of the eurozone crisis last year. Read more
Ireland's Enda Kenny, left, and Germany's Angela Merkel meeting last year in Berlin
With just over a month of funding left in Ireland’s €67.5bn three-year bailout, Irish prime minister Enda Kenny sent a subtly-worded letter to his fellow EU leaders as they gathered in Brussels today for their two-day summit.
At first glance, the letter (we’ve posted a copy here) seems to simply repeat messages that Kenny has made in the past: he’s weighing whether to request a line of credit after they exit the bailout; he wants quick completion of the eurozone’s “banking union”; he continues to hit his bailout targets.
But a closer read between the lines shows a more complicated game going on. In essence, Kenny is reminding other leaders they have failed to live up to promises made to Ireland last year that would have significantly lowered the Dublin’s sovereign debt levels. An annotated look at the letter after the jump.
Finance ministers MIchael Noonan of Ireland, center, and Vito Gaspar of Portugal, right, with the EU's Olli Rehn at January's meeting.
After Greece last year won a restructuring of its €172bn rescue that included an extension of the time Athens has to pay off its bailout loans, Ireland and Portugal decided they should get a piece of the action, too.
So at the January meeting of EU finance ministers in Brussels, both Dublin and Lisbon made a formal request: they’d also like more time to pay off their bailout loans. According to a seven-page analysis prepared for EU finance ministry officials a few weeks ago, though, the prospect is not as straight forward as it may seem.
The document – obtained by the Brussels Blog under the condition that we not post it on the blog – makes pretty clear that while an extension might help smooth “redemption humps” that now exist for Ireland (lots of loans and bonds come due in 2019 and 2020) and Portugal (2016 and 2021), it’s not a slam dunk case. Read more
Ireland's Kenny, right, with European Commission chief Barroso at start of the Irish EU presidency.
Ireland appears to be taking advantage of the comparatively positive sentiment in the eurozone that has marked the start of the year by moving back into the bond markets in a major way.
Last week, Dublin raised €2.5bn by issuing additional five-year government bonds, and then days later was able to convince private investors to buy €1bn in debt it holds in one of the largest banks nationalised at the peak of its banking crisis. This morning, the government was at it again, announcing a €500m auction in short-term t-bills will take place tomorrow.
Despite the winning streak, there’s still a lot of nervousness in official circles about whether Ireland can fully emerge from its bailout when its €67.5bn in rescue loans run out in November. All this has led to a debate in Dublin about whether Ireland should seek additional aid, such as a line of credit from the International Monetary Fund or the EU – which would be backed by the European Central Bank’s new limitless bond-buying programme – to provide a backstop to new Irish bonds.
The Irish website TheStory.ie got its hands on the new European Commission report on the Irish bailout, which makes clear on page 44 that Dublin is in discussions with the troika about whether the ECB’s bond-buying programme – known as Outright Monetary Transactions – can be accessed: Read more