Irish Prime Minister Enda Kenny is on the verge of an agreement with the French that will allow for a cut in the interest rate charged on the EU/IMF bail-out.

Kenny has reported a ‘significant’ breakthrough in his talks with French President Nicolas Sarkozy designed to secure a cut in the rate.

Sarkozy has led French resistance to any interest rate cut in protest at Ireland’s low rate of corporation tax.

Now officials from Ireland and France are working with both leaders to find an agreement on tight new budgetary rules which the Irish government would adhere to in exchange for an interest rate cut.

Kenny and Sarkozy spoke at an EU leaders summit in Brussels dominated by the European Union’s new bail-out for Greece.

An Irish government spokesman confirmed progress had been made in the talks between Kenny and his French counterpart.

“The talks are encouraging as the stalemate was broken,” said the spokesman.

“The two leaders agreed that talks would continue until a satisfactory outcome was reached.”

The Irish Independent reports that instead of a corporation tax hike, the French are now believed to be looking for a concession from the Irish government on the broad area of maintaining tight budgets.

The European Council meeting also expressed satisfaction that Ireland is reaching the targets set out under the terms of the EU-IMF bailout.

Commission President Jose Manuel Barroso said: “The council welcomes progress made in Ireland in the implementation of its reform programme, which is well on track.

Barroso added: “Building on a cross-party consensus on the need to reform, strict implementation of those programmes will ensure debt sustainability and will support the return of Ireland and Portugal to the financial markets”.

Irish Prime Minister Enda Kenny & French President Nicolas Sarkozy