Citi economist Willem Buiter: 'European leaders need to make concession or Ireland will have no option but to go it alone. They're playing with fire with this brinksmanship'

CITI's influential chief economist Willem Buiter yesterday warned that EU's leaders were "playing with fire" by not engaging constructively with Ireland's efforts to restructure its debt.

The comments come as the new Government battles to get the European Commission, the European Central Bank and the International Monetary Fund to agree a better deal on the €67bn bailout. Europe offered a cheaper interest rate on its portion of the loan last weekend, but only if Ireland agreed to change its corporate tax rate -- a move the Government insists it will not countenance.

"They [European leaders] have to come up with something for Ireland," Mr Buiter said in an interview yesterday on Bloomberg TV. "They're going to have to make concessions or Ireland will have no option but to go it alone. The Europeans are playing with fire with this brinkmanship."

Mr Buiter, who holds a position with the London School of Economics, also levelled criticism at Europe's broader handling of the financial collapse. "It [the debt crisis] won't go away unless Europe restructures a couple of sovereigns and deals with its dummy banks," Mr Buiter stressed. "All that's been done so far is to kick the problem down the road".

In a separate interview also aired on Bloomberg yesterday, Taoiseach Enda Kenny reiterated Ireland's strong stance on keeping the 12.5pc corporate tax base, and slammed the current rescue deal.

"It is grossly unfair to expect the taxpayer to have to pay 100pc for the reckless lending practices of banks which cause this in the first instance," he said, in a veiled reference to the bailout's ban on forcing losses on 'senior' lenders to Ireland's banks.

Mr Kenny also described the 5.8pc interest rate Ireland is paying on the bailout funds as "too severe".

The EU yesterday raised another €3.4bn of the Irish cash on the money markets -- at a slightly better interest rate than was expected -- and said it would hand over the funds on March 24. Europe is paying an interest rate of 3.125pc on the money -- some two basis points or 0.02pc cheaper than the rate it had expected to be charged.

Meanwhile, German Finance Minister Wolfgang Schaeuble, fresh from his meetings with Irish Finance Minister Michael Noonan earlier in the week, yesterday told a Berlin gathering he was "optimistic" that Ireland would be "successful" in restoring its public finances. (Additional reporting: Bloomberg)

Irish Independent