Cardiff would have liked ‘more notice’ over Honohan interview

Former general secretary of the Department of Finance Kevin Cardiff said he would have liked "more notice" from Central Bank of Ireland Governor Patrick Honohan about his decision to go on RTÉ's Morning Ireland radio programme on November 18th 2010 to declare that Ireland was in talks with the EU and IMF about a bailout, at a time when the Government was still denying this publicly.

“He took a different view to the Minister [Brian Lenihan] and a different view to mine as to when was the time to talk more openly to the Irish public,” he told the banking inquiry on Wednesday. “I think in truth there was only a day or two in it.”

By the time Mr Honohan went on Morning Ireland, Mr Cardiff said the Government had gone from "contacts" with the EU and IMF on a bailout to "short and focused discussions".

“It was clear there was a momentum building,” he said.

“I think what Patrick said on the Thursday the Minister himself would have been willing to say on the Friday evening,” Mr Cardiff added.

“I wasn’t especially upset by it. I thought ‘well I wouldn’t have done it but he has to do his duty as he sees it’. Mr Lenihan thought the same because there was no sense of rancour between them afterwards. I think they saw each other as doing a slightly different job.”

Mr Cardiff said he “never saw a moment when I didn’t think he was working for Ireland” in spite of his dual role as a member of the governing council of the European Central Bank, which was part of the bailout negotiations with the State at the time.

When asked by Senator Marc MacSharry if Mr Honohan’s intervention on radio had strengthened or weakened Ireland’s hand in its talks with the Troika, Mr Cardiff said: “We’d already done a lot of negotiating by then. I’m not sure. I don’t think it did make an enormous difference to the end point.”

Mr Cardiff said believed that former ECB president Jean-Claude Trichet and ex-US treasury secretary Tim Geithner opposed a suggestion to burn bondholders from the IMF at the time of the bailout negotiations in late 2010. But he said other major IMF donor countries could have opposed the move too.

He said Brian Lenihan had “one very optimistic day” that bondholders might be burned around that time.

Mr Cardiff said Mr Trichet was “trying to hold together the entire EU project” and probably felt that for a saving of maybe € 10 billion for Ireland, it might not be “worth doing” if it put the currency at risk.

On whether Ireland had done more proportionately than other euro zone countries to save the currency, Mr Cardiff said: “No-one paid as much as us. We have spent more than anybody else and made a much greater fiscal effort than almost anybody else.”

Earlier he said the Department of Finance made discreet inquiries about how it could access bailout funds from the IMF in September 2008.

Mr Cardiff said he asked a colleague to “make a discreet inquiry as to how you get into these things if you need them”.

He said the IMF had let it be known to the Government that it would be “available if we wanted them” but the “firm instruction” from Brian Lenihan was not to engage with the suggestion.

Mr Cardiff said the State had no problem accessing market funding in 2009 and 2010.

“There was no huge advantage to an IMF programme before we got it,”he said. “The banks were a problem. By the time we got to an IMF programme [IN 2010]the sovereign had a problem.”

Patrick Honohan has said he received a call from the IMF in May 2010 about Ireland considering a precautionary bailout programme.

Mr Cardiff said he doesn’t recall being told this and, besides, Ireland would have need assistance from the EU as well.

Mr Honohan said he was “quickly put in his place by Merrion Street officials” when he put this suggestion to the department in 2010.

“That could well have happened,” Mr Cardiff replied, adding that he had a “very respectful relationship” with Mr Honohan at the time.

Responding to a question from Eoghan Murphy of Fine Gael, Mr Cardiff said there was “never a serious discussion” with Mr Lenihan about a euro exit although the department did give “serious consideration” to contingency plans.

“There was certainly work done,” he said, adding that many other euro zone countries were “having similar conversations”.

On Wednesday morning, John McCarthy, the Department of Finance’s chief economist, told the inquiry that a 2005 announcement of a review of tax incentives in the property market came after “the horse had bolted”.

The inquiry will also question William Beausang, assistant-secretary at the department, on Wednesday.