Trichet denies ECB blackmailed State

Former president of the European Central Bank (ECB), Jean-Claude Trichet, has rejected a claim the bank blackmailed Ireland into entering the Troika bailout by threatening to cut off credit in a letter to former minister for finance Brian Lenihan in November 2010.

"It's exactly the contrary," Mr Trichet said in response to the claim by Socialist Party TD Joe Higgins, at a question and answer session with members of the Oireachtas banking inquiry in Dublin.

“We had helped Ireland more than any other country. We were the institution that was helping Ireland much more than any other central bank did for any country [worldwide].”

Mr Trichet was speaking at a conference organised by the Institute of International and European Affairs. This was used as a means for members of the Oireachtas banking inquiry to question Mr Trichet about the ECB’s role in the financial crash in Ireland from 2008 onwards. The bank was not prepared to attend regular inquiry hearings in Leinster House.

Fianna Fáil’s Michael McGrath said a gun had effectively been put to the head of the Irish government.

Mr Trichet rejected this claim. “Brian knew we were helping Ireland more than any other country. We were together on the same side trying to get out of a situation that was unfortunately the most dramatic you could imagine.”

At the time, Ireland was in receipt of €140 billion worth of credit from the ECB, the equivalent of 85 per cent of its GDP, he added.

“The exchange of letters made clear that . . . we could not continue to be the lender of last resort to [Irish] institutions that were clearly considered insolvent,” Mr Trichet said.

He made no request to Central Bank of Ireland governor Patrick Honohan to go on RTÉ radio in November 2010 to say Ireland was entering an IMF-EU bailout programme.

“I have absolutely no memory of such an announcement,” he said. “I certainly didn’t ask him to make public anything.”

Kieran O'Donnell of Fine Gael asked whether Ireland was right to enter a bailout. "It goes without saying that the government of Ireland took a good decision," Mr Trichet said.

On the bank guarantee, he said the ECB “never hesitated to support Ireland”, but he would “probably” have advised the government to consult in advance with other EU states on what he described as a “new concept”.

“We were not in favour of this guarantee. We are on record on this in writing,” he added.

Earlier, Mr Trichet told the inquiry chairman, Ciarán Lynch, there was “no contact” from the Irish government in relation to the bank guarantee “either to me or the ECB or to my knowledge other [EU] governments”.

Mr Trichet said concerns about Irish banks first became known to him in August 2007 when the ECB had given an unlimited level of liquidity supply to banks in the euro area as long as they had sufficient collateral.

He told a member of the inquiry, Senator Sean Barrett, the ECB "learned about the guarantee [in September 2008] through the media. I don't blame anybody. You have to understand that Ireland was one of the ships in a terribly agitated sea."

About Mr Lenihan, he said: “He did what he thought was the best in absolutely traumatic circumstances.”

When asked if Anglo Irish Bank’s imminent collapse on the night of the bank guarantee in September 2008 should have been known to the ECB, he answered: “That has to be reflected upon. My working assumption is that the local surveillance authority was thinking they would avoid the drama. I don’t know. I had 15 countries . . . and many, many issues.”

Mr Trichet accepted he told the government in 2011 that, as Fine Gael TD Eoghan Murphy described it, an "economic bomb would go off in Dublin" if Anglo bondholders were burned to the tune of €6 billion.

The ECB, he added, “definitely [did] not” threaten to cut off Ireland’s line of credit if Anglo bondholders were burned at that time. “The decision was not taken by the ECB.”

He earlier told Mr Lynch, the inquiry chairman, the ECB was only accountable to the European Parliament and so it was not possible for it to participate in national parliamentary inquiries.

“That does not prevent me from talking to you at the present moment,” he said.