Ireland 'forced' to take bailout

 

Brian Lenihan has claimed the European Central Bank forced Ireland into taking a bailout and rejected claims by a senior ECB figure that the bank warned Ireland in mid-2010 of the dangers it faced.

He has also accused members of the ECB executives of briefing against Ireland and of “betrayal”.

In a wide-ranging interview on the events surrounding last November’s bailout, Mr Lenihan criticised some of the 17 governing board members of the bank for the “damaging” manner in which they had briefed some media about Ireland.

“On the betrayal issue, I did feel that some bank governors should not be speaking out of turn and that only the president should speak for the bank.”

He describes as “at variance with the facts” a statement made in an interview in this newspaper in January by Lorenzo Bini-Smaghi, one of six executive board members of the ECB.

In the interview Mr Bini-Smaghi claimed ECB president Jean-Claude Trichet had pressured the Government from mid-2010 to bring forward the 2011 budget. Mr Lenihan denies any such representations were ever made.

The position of the ECB on Ireland’s seeking of assistance was different from that of the European Commission, said Mr Lenihan.

“I don’t think the commission were anxious to bounce member states into a programme.

“That was my strong impression from my discussions with Commissioner Rehn.” he said, adding that “the ECB clearly subscribed to a different view.”

Referring to the visit of European Commissioner Olli Rehn to Dublin on November 8-9th, before the first indications emerged publicly that a bailout might be in the offing, Mr Lenihan said: “There was no question of our entering the facility raised by [Mr Rehn].

“In fact, quite the contrary: he suggested it wasn’t essential for Ireland to access funds from any European facility.”

Both the commission and the ECB continue to insist they acted in tandem at all times.

In September Mr Lenihan said the ECB appeared to believe the Irish banking crisis could be solved by greater budgetary stringency. According to Mr Lenihan, the Frankfurt-based central bank had shown relatively little interest in the problems of the Irish banking system.

On the final terms of the bailout, Mr Lenihan described the interest rate charged as “above what was required” and the schedule to downsize the banking system as “unimplementable”.

On his own role in the bailout and the final acceptance of its terms, he said: “I believed that I had fought the good fight and taken every measure possible to delay such an eventuality, and now hell was at the gates.”

Giving some hint of the strains with the cabinet, he said: “I had had such a fierce struggle in the previous 2½ years to bring my colleagues and the country with me on what had been a very difficult economic programme.”

He gave a graphic description of his feelings when the bailout talks were concluded. “I’ve a very vivid memory of going to Brussels on the final Monday to sign the agreement and being on my own at the airport and looking at the snow gradually thawing and thinking to myself, this is terrible. No Irish minister has ever had to do this before.”