ECB bailout pressure details belong in public domain
The extent to which we were forced into the 2010 bailout is relevant to current negotiations
IN THE most recent instalment of his masterly biography of Lyndon Johnson, historian Robert Caro writes that it is often impossible to reach a definitive truth about historical events even when all participants have given their account.
He does so at a point where he deals with the extraordinary events of July 14th, 1960, when John F Kennedy, having defeated Johnson for the presidential nomination, asked him to be his running mate.
The difficulty faced by Caro dealing with events of half a century ago is compounded for those trying to establish the truth of more recent events.
This week saw the publication of the latest instalment of letters relating to Ireland’s November 2010 application for a bailout. This correspondence is of more than historical interest these days since at its heart is the question of whether Ireland was bounced or bullied into the bailout by the European Central Bank.
The late Brian Lenihan dealt with some aspects of the bailout story in an extended interview with Dan O’Brien for BBC Radio 4 in April 2011. He had hoped to get down, for later publication, a detailed account of the political dimension to these and other events but sadly became too ill.
Apart from Lenihan’s account it is worth drawing attention to two other contributions to the record around these events that emerged in recent weeks.
The first is a fascinating RTÉ One to One interview by Cathal Mac Coille with NUI Galway economist Alan Ahearne, an adviser to Lenihan between March 2009 and the 2011 general election.
From the off, Mac Coille questioned Ahearne about the bailout, asking him bluntly whether Ireland was bullied into it for reasons that had to more with to do with European banks than Ireland’s needs. Ahearne’s response was that the ECB was looking after itself, getting worried about the money it had lent to Irish banks and wanting more control of the situation so as to increase the prospect of getting its money back.
He added that when it came to the negotiations Lenihan wanted to burn some of the bondholders but the ECB “absolutely rejected” this suggestion.
Mac Coille asked Ahearne about the public sense that ministers were not telling the truth by denying a bailout was coming when it was patently going to happen.
Ahearne pointed out that he was an economic adviser and not part of the political communications operation but his sense was that the government was holding out on a formal bailout application in order to get a better deal.
Ahearne sidestepped Mac Coille’s question on the role of Central Bank governor Patrick Honohan in going on the Morning Ireland radio programme on November 18th, 2010.
Brian Lenihan’s aunt, Mary O’Rourke, is less circumspect. In her recent memoir she says that when Honohan rang Lenihan from Frankfurt some time after 9pm on November 17th, he asked him to call a cabinet meeting that night to announce that Ireland was seeking a bailout. O’Rourke speaks of Lenihan returning to her company after the call “quietly fulminating” and adamant his hand would not be forced in such a way.
In her review of O’Rourke’s book in last Saturday’s Irish Times, Geraldine Kennedy dismissed O’Rourke’s assessment that there was “a potential conflict of interest between what was good for Ireland and what was good for the ECB”. In so doing Kennedy was too hasty. It may not sit comfortably with the embedded notions of the heroes and the villains in these events but it requires further consideration.
For my own part, as someone who spoke to Lenihan about the political dimensions of these events, I would make the following observations.
Lenihan had long foreseen that Ireland was likely to require some kind of bailout and expected it would come in spring or summer 2011. He and then taoiseach Brian Cowen were subject to intense private pressure from the ECB in the lead-up to Friday, November 12th, 2010. This pressure came in the form of the letters published recently by Stephen Collins in this newspaper.
However, it also came in a series of at times heated telephone conversations. Lenihan and Cowen resisted this pressure, arguing that the ECB should do its job as bank of last resort and that the worsening European crisis should be addressed by a European-wide response.
Having failed to force the Irish government’s hand privately, the ECB leaked the suggestion that Ireland would go into a bailout in order to publicly bounce it into doing so.
Although recognising the inevitable, Lenihan resisted pressure for an express acknowledgment of this in order to shore up Ireland’s already weak negotiating position. In particular he was anxious to ensure that the troika would accept the Irish government’s four-year recovery plan.
He expressly cautioned some of the ministers doing media that weekend to be careful how they dealt with the question of whether Ireland would seek a bailout.
Lenihan strongly resented Honohan’s actions in putting himself on Morning Ireland “announcing” the bailout application. He saw it as being in the ECB’s interests but not to the benefit of Ireland’s position.
After he left office in the spring of 2011 Lenihan rejected suggestions from some that he should get his version of these events and the relevant documents into the public domain either on or off the record.
He was anxious to do nothing that would strain relations between the new government and the ECB.
At this stage, however, as the Government seeks to renegotiate our bank debt, the extent to which Ireland was pressurised into a bailout in November 2010 is very relevant. Those who know the full circumstances should put them in the public domain.