BRIAN LENIHAN has claimed that he warned the European Union’s institutions of the risk of social unrest in Ireland if the budgetary adjustments were too severe.
In a wide-ranging, two-hour interview on the events surrounding Ireland’s EU-IMF bailout, the former minister for finance said: “I thought that Europe was pushing matters where they could push people beyond the brink if they weren’t careful.”
He said that this concern “wasn’t really accepted”.
On his time leading the Department of Finance, Mr Lenihan said, “I felt as minister for finance, we’d lost our sovereignty virtually from the moment I was appointed in May 2008 because of the difficulties in the banking and public finances.
“I mean sovereignty is your right to choose different options. I didn’t find as minister for finance very many options open to me.”
On the signing of the bailout terms, he said, “Ireland was officially in a situation where it was no longer in control of its own destiny.”
He also claims there had been pressure from the European Central Bank prior to November to put money from the National Pension Reserve Fund into Anglo Irish Bank.
“There were sources within the bank arguing that this money should be spent on Anglo Irish Bank, this money should be spent on the bank support which the European Central Bank was giving,” he said. “So the existence of the Irish reserves was in itself a source of friction with the bank. Not with the other community institutions, but with the bank.”
During the bailout talks in November, Mr Lenihan says the government sought to impose losses on banks’ senior bondholders.
He described it as “the one issue on which there was a considerable amount of dialogue and argument”.
But the option was ruled out by the troika, he said.
“I discussed the matter with Dominique Strauss-Kahn himself and Monsieur Trichet , but it was clear to me there was no budge on this whatsoever in the discussions.”
In the interview, Mr Lenihan said that the first hard indication he had of the ECB wanting Ireland to accept a bailout came in a letter he received from the head of the bank, Jean-Claude Trichet, on November 12th.
In the letter, according to Mr Lenihan, Mr Trichet “raised the question about whether Ireland would be participating in a programme at that stage”.
It is known that at a meeting of the 17-man governing council of the ECB on the previous day, the issue of an Irish bailout was raised.
The governor of the Irish Central Bank, Patrick Honohan, who is a member of the ECB’s governing council, also said in a related interview that he had been in favour of Ireland accepting a bailout from the “very first days of November”.
Ireland formally applied for assistance on November 21st, and a deal was reached seven days later.
On the origins of the push for Ireland to accept assistance from the ECB, Mr Lenihan said Prof Honohan had “alerted me to the fact that again since early September these discussions had been taking place in the bank, and that the bank was becoming hostile to their collateral dependence on Ireland”.
Mr Lenihan was also critical of the European Commission’s competition directorate general, which has been centrally involved in bank restructuring decisions and had the power to veto changes it believes to be in breach of European law.
Mr Lenihan said: “The commission was very slow to sanction any restructuring, and restructuring plans seemed to take a very long time to progress through the commission.
“It was only in September 2010 that the commission realised the position is very urgent.”
Mr Lenihan’s then ministerial colleague, Eamon Ryan, of the Green Party, in a separate interview on the bailout also attributed delays in restructuring the banks in part to the commission.
Mr Lenihan criticised France and Germany for their bilateral declaration of October 2010 on restructuring government debts. It “created huge problems for Ireland”, he said.