ECB refuses to comment on Lenihan's bailout claim

THE EUROPEAN Central Bank (ECB) has refused to comment on claims by former minister for finance Brian Lenihan that it forced …

THE EUROPEAN Central Bank (ECB) has refused to comment on claims by former minister for finance Brian Lenihan that it forced Ireland into a bailout.

It comes as the ECB’s chief economist was accused of “pouring oil on the fire” by warning that “short-sighted” talk of restructuring debt could trigger a second financial crisis in the euro zone.

Brian Lenihan told a BBC radio documentary that it was at the insistence of the Frankfurt-based bank that Ireland accepted EU-IMF loans. At the time, he said, the European Commission was more open-minded.

A spokesperson for the ECB said yesterday the bank had “no comment” on the assertion.

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Asked if the ECB and the commission were of divergent views on Ireland last autumn, the bank again declined to comment.

The Frankfurt bank was equally tight-lipped on Mr Lenihan’s third main assertion, that senior ECB figures were briefing against Ireland’s interest in the critical period before the bailout was announced.

On the former minister’s claim that the bank used a language of panic ahead of the bailout being announced, again it had “no comment”.

Leading German media have taken an increasingly critical view of the ECB’s role in the euro zone drama.

The leading Handelsblatt daily accused ECB chief economist Jürgen Stark of spooking markets with his remark that “simple” solutions like restructuring debt could cause more harm than good.

“A debt reduction seems perhaps as the simple route but the underlying budgetary and structural problems would not be solved,” he told Germany’s ZDF public television on Saturday.

It would result, said Mr Stark, in countries being cut off “for an unforeseeable time” from finance markets and dependent on “outside financial assistance”.

He said the current restructuring discussion was “based on the completely false assumption that one or more [euro zone] member states is insolvent”.

Such a path was highly risky, given that the closely knit nature of the euro zone economies could quickly turn a local financial problem into a continental crisis.

“In the current debate these risks are, wrongly, too often neglected,” he said, comparing the risks to the shock that followed the collapse of Lehman Brothers.

Earlier this month Mr Stark said the ECB was “not responsible for what happened in Ireland”.

Last week a leading German economist who advises the Berlin federal government said he saw no option but for Greece to restructure.