A few months ago, I visited the bewildering Historical Museum in Frankfurt, Germany. Over multiple stories, its gigantic collection tells the story of the city through centuries of European upheaval. This includes detailed accounts of the bitter post-World War II urban design debates that surrounded the meticulous reconstruction of its destroyed medieval centre and the addition of high-rise buildings to its skyline. 

One section takes visitors through the financial cycles that saw Frankfurt rise as the banking centre of Europe, then lose this status, then regain it after the war as a result of a conscious decision by the Allied powers then occupying western Germany. 

It was a striking visit because it showed that so many of the debates now agitating Ireland, from planning policy to the place this country wants to carve out for itself in European and global geopolitics and financial flows, played out in Germany while Ireland as a State was still in the future or in its infancy.

There were many lessons to be learned from an older country that had faced those questions before, if only we were interested enough to look – and I don’t mean that Ireland should always make the same decisions. 

Facing the far-right threat

In the more recent past, too, German citizens have faced a challenge they have in common with their Irish counterparts: the rise of the far right.

On Saturday, Fergal wrote an illuminating column drawing from his academic background and his presence in Leipzig a few days ago at one of the countless mass protests the country has experienced against plans by the AfD party and its allies to deport large parts of the population they regard as non-German.

He explains why the AfD’s secret meeting to discuss the idea was a chilling reminder of the 1942 Wannsee conference where Nazi officials planned the Holocaust. “Yet the distressing flow of temporal analogies does not, unfortunately, stop there,” Fergal wrote. The AfD’s trajectory in the polls is eerily similar to that of the Nazis in the 1930s, sending shockwaves throughout Germany’s political landscape, he finds.

While the ruling coalition between Social Democrat Chancellor Olaf Scholz and his Green and Free Democratic allies has just announced measures to curb radical political activism, Fergal chose to place his focus on the more pivotal role of German conservative Christian Democrats in turning the far-right tide. Some members of Ireland’s traditional political parties, who have shown astonishing leniency towards the violent anti-immigration activism of recent months, would be well inspired to read his article.

A German minister who wants to compete on tax

For the time being, however, the so-called traffic-light coalition of red, green and yellow politicians is in charge in Berlin. Its Minister of Finance Christian Lindner, who hails from the yellow, pro-business FDP shade of the German government, was in Dublin this week to meet his Irish counterpart Michael McGrath and Eurogroup President Paschal Donohoe.

Lindner has been presiding over dispiriting sluggishness in his country’s economy. Sean wrote on Wednesday about the specific impact of industrial decline in Germany, where the energy shock caused by Russia’s invasion of Ukraine has stunned the crucial manufacturing sector. 

In Dublin, Lindner was asked about the ongoing debate in his country as to whether it has become the economic “sick man of Europe”. “Germany is not a sick man but we have a problem with our fitness,” Lindner said. He pointed to the need for labour market reform, easier application of funds from EU-wide capital markets to invest in SMEs and German corporation tax reform. With this, “the unfit will be fit again,” he assured.

His remarks on corporation tax take on a special meaning in Ireland, where many multinationals have offices covering international markets – the largest of which is typically Germany. The profit from doing business with German customers is now taxed at 15 per cent in Ireland, half of the rate applicable in Germany.

The European Commission now wants to harmonise not only the minimum tax rate but also the calculation of the profit base it applies to. The Commission’s “Business in Europe Framework for Income Taxation” (Befit) proposal would erode advantages such as the generous intellectual property amortisation regime available in Ireland. 

I asked Lindner for Germany’s position on the proposal, and his reaction to its initial rejection from Ireland via an Oireachtas committee report, on the basis that tax should remain a national area of legislation.

“When it comes to tax policies within the European Union, I think this is mainly the responsibility of the member states and all the other steps have to be very wisely considered, because the economic situation is different, traditions are different and there should be room for reasonable tax competition,” the German minister replied.

“Member states which have a lack of public infrastructure, for example, can attract investment with lower corporate tax. On the other hand, member states with highly developed infrastructure and other structural advantages can ask for higher taxation. You should allow this means of competition among member states in a reasonable sense.”

Both he and McGrath said their focus was on securing tax agreement at the global level through the OECD. The minimum 15 per cent tax rate for multinationals is one pillar of this agreement, but another pillar remains under negotiation on the reallocation of a portion of taxable profits to market countries – in this case, from Ireland to Germany.

The alternative would be the multiplication of various initiatives around the globe, such as Befit, McGrath warned. “We stand over the view that fair tax competition is a legitimate policy tool that must be available to member states and to small countries, indeed to every country, but it has to be within certain parameters of what is fair. The global agreement, in our view, offers the best opportunity to achieve a settlement on those issues,” he said.

In this column two weeks ago, I warned that Ireland might find itself isolated if it rejected Befit in the face of support from other EU countries. Lindner’s remarks show that I was wrong: As long as the finance minister of Europe’s largest economy is more interested in cutting the German corporation tax rate than in forcing Ireland to raise its own, Befit is dead in the water. On this point, McGrath has found a close ally in Lindner. 

This is just another reason to keep a close eye on what is happening in Germany.

*****

Elsewhere this week, Niall interviewed Michael McAteer, the well-known managing partner of Grant Thornton until last month. Fresh out of this position, McAteer took on roles with EasyGo and Nostra. The interview tells us as much about his outlook on business as the potential of the two rising Irish companies he has picked.

Tom picked through the lengthy saga of the Central Bank’s vetting of a man’s application to join the board of a regulated investment fund, as told through the decision of the Irish Financial Services Appeals Tribunal quashing the regulator’s rejection of his application. It is a must-read for anyone involved in the financial services industry or the regulatory space.

The courtroom battle for the control of the Fota Island resort between Chinese businessman Yuzhu Kang and his business partners concluded on Thursday with a settlement. Francesca was in court to witness the outcome.