ECB did more for Ireland than any other country, says Trichet

Thu, Oct 11, 2012, 01:00

THE EUROPEAN Central Bank did more to finance the Irish economy before the State’s bailout than “perhaps any central bank did for any economy”, the institution’s former chief Jean-Claude Trichet has said.

The ECB’s dealings with Ireland in the run-up to the rescue two years ago has been a source of controversy since the late Brian Lenihan claimed last year that the Frankfurt bank had betrayed Ireland by bouncing the government into a rescue programme.

The Irish Times disclosed new information last month about the pressure the bank brought to bear on the then government, which culminated in an insistence it apply for a bailout or risk losing emergency support for Irish banks. Mr Trichet wrote three letters to the late Mr Lenihan, then minister for finance, and spoke with him directly more than a week before the Fianna Fáil-Green coalition applied to the EU and International Monetary Fund for the bailout in November 2010.

Asked yesterday if he believed his letters to Mr Lenihan would be published, Mr Trichet declined to say but stressed that the ECB had taken unprecedented steps to help Ireland’s banks during the period.

“I had a lot of conversations with the Irish government and a lot of conversations with all governments in Europe,” he told the news agency Reuters.

Mr Trichet said his message to all governments at the time was: “You have to be as sound as possible, because the circumstances are exceptionally grave . . . The ECB had probably done for Ireland in terms of financing the economy more than any other economy in the euro area and perhaps more than any bank for any country.” He has repeatedly denied forcing Ireland into a bailout, saying last month the “overall sentiment” of Irish leaders at the time was that the State needed help from the IMF and European institutions.

Asked yesterday whether he understood the depth of public feeling in Ireland on the circumstances surrounding the bailout, Mr Trichet referred to the Irish economy’s delicate position at the time. “Nevertheless, there had been in the past decisions, or the absence of decisions. I don’t want to comment on that. But we did more for Ireland than we did for any other country.”

Responding to the claim that Spanish banks were getting easier terms for their bailout than the Irish banks, the former ECB president said he would not engage in such comparisons. “These were difficult circumstances, a difficult period of time, with the crisis which was unfolding,” he said.

Mr Trichet predicted that the ECB’s new bond-buying programme would be more successful than its first attempt because its design meant governments would be forced to mend their finances.