VZCZCXRO4720
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHDL #0054/01 0300923
ZNR UUUUU ZZH
P 300923Z JAN 08
FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC PRIORITY 8878
INFO RUCNMEM/EU MEMBER STATES
RUEHBL/AMCONSUL BELFAST 0665

UNCLAS SECTION 01 OF 02 DUBLIN 000054 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN PGOV EI
SUBJECT: AMBASSADOR TALKS PHILANTHROPY AND ECONOMY WITH 
FINANCE MINISTER COWEN 
 
DUBLIN 00000054  001.2 OF 002 
 
 
¶1. (SBU) Summary.  On January 23, the Ambassador met with 
Finance Minister Brian Cowen to gauge the Minister's 
attitude toward tax and other legislative changes aimed 
at increasing charitable giving in Ireland in advance of 
the Ambassador's February 21 Philanthropy Symposium. 
They also briefly discussed key economic challenges 
facing the Irish government.  Cowen seemed personally 
amenable to providing additional tax and other incentives 
in support of charitable giving, but noted that there could 
be challenges to selling these changes politically.  He 
said there are sensitivities to giving the wealthy a tax 
break and giving donors discretion over the application 
of donated funds.  Some believe funds donated subject to 
a tax deduction should go into a "social investment fund" 
administered by the government.  Cowen said that the 
important thrust of his ministry in the year ahead will 
be improving public- and private-sector productivity. 
He commented that, while prices have dipped slightly, 
the housing market looks to be in good shape and the 
banking sector continues to be well capitalized and 
liquid.  Cowen noted that tax revenues have dipped but 
that there is a policy consensus for maintaining 
capital budget spending at high levels, which means 
reducing the rate of growth of current government 
expenditures -- a future fight he clearly does not look 
forward to.  End Summary. 
 
Building a Philanthropic Culture 
-------------------------------- 
 
¶2. (SBU) The Ambassador met with Cowen to touch 
base with him in advance of the Ambassador's 
February 21 Philanthropy Symposium and seek his 
advice on the possibility of tax and regulatory 
changes designed to boost philanthropic giving. 
Cowen said that Ireland is only beginning the 
discussion on philanthropy and welcomed the 
Ambassador's initiative as a valuable 
contribution to the debate.  However, he 
continued, some tax and regulatory changes 
would be difficult to sell to the Irish 
public, which, he felt, would view any such move 
as a "handout to the rich" because of the strong 
cultural belief that the tax code should be 
"equitable."  Cowen argued that what is needed is 
a concerted campaign to educate politicians and the 
public about sensible policies that encourage 
philanthropic giving. 
 
¶3. (SBU) Cowen's preference would be to amend the 
tax code but to put the donated money into a 
social investment fund, which would allocate the 
money.  Under this scheme the donors would have 
no say over the ultimate destination of the 
money.  The Ambassador argued that such a 
structure would bring about less giving than if 
Ireland were to follow the American model of 
allowing the donors to determine how their charitable funds 
are directed.  The Ambassador also stressed that 
change was needed to ensure that wealthy Irish 
were encouraged to keep their money in Ireland 
and to reduce the burden on the state coffers of 
supporting institutions (hospitals, museums, 
etc.) that are largely funded publicly in Ireland 
but privately in the U.S.  Cowen took these points 
and promised that his staff would attend the 
Symposium and maintain contact with the Embassy on 
the issue. 
 
Banks OK but Spending a Problem 
------------------------------- 
 
¶4. (SBU) On the economy, Cowen and his deputy, 
Kevin Cardiff, said that, while prices have 
dipped slightly, the housing market remains 
healthy.  Cardiff noted that the "underlying 
demographics support the current level of house 
prices" and that the government does not expect a 
steep price drop.  Cowen said that Irish banks 
remain well capitalized and do not seem to be 
having difficulties. 
 
¶5. (SBU) Cardiff continued that the European 
Central Bank (ECB) would have difficulty 
following the Fed's large interest rate cut 
because of greater upside inflation risk in 
Europe.  Cowen pointed out that, after many years 
of little wage growth, the recent large German 
wage increases have stoked inflation.  He said 
that Ireland will no longer have the luxury of 
 
DUBLIN 00000054  002.2 OF 002 
 
 
riding the wave of German wage restraint. 
 
¶6. (SBU) Cowen said that the Irish government's 
central economic concern now is to find a new 
post-Celtic Tiger model.  Key components will 
likely be policies aimed at increasing public- 
and private-sector productivity, keeping a lid on 
growth in current government expenditures 
(public-sector wages principally), and maintaining a 
vigorous capital spending program.  On the 
latter, Cowen said that there was a consensus among 
policymakers that Ireland needed to upgrade its 
infrastructure.  He said that, for the first time, 
productivity improvements may need to be factored 
into any future public-sector pay deals. 
 
Comment 
------- 
 
¶7. (SBU) Comment: Cowen appeared personally amenable to 
exploring ways to amend the tax code to promote charitable 
giving and seemed open to a frank discussion of the matter 
at the Symposium.  However, his political instincts trumped 
his personal views, counseling that an education campaign 
would 
be needed prior to proposing modifications to the tax code 
and 
providing more incentives for charitable giving. 
That said, we believe we can work with his Ministry to make 
progress on the issue.  Cowen was clearly not looking 
forward to a tussle with the civil service on future wage 
deals.  However, he knows that with falling tax revenues 
and a clear need to improve Ireland's infrastructure 
(transport links, hospitals, schools) this is a fight in 
which he must engage.  End Comment. 
FOLEY