Timeline of the Euro crisis
Published 23/03/2014 | 02:30
Under massive pressure, then finance minister Brian Lenihan, attempting to avoid a Troika bailout, has initial "hypothetical talks" with key officials about replacing the euro with another currency.
Lenihan fails and the Cowen government finally succumbs and formally requests an €85bn bailout package from the Troika.
Enda Kenny and Eamon Gilmore lead new Fine Gael/Labour Government into office on March 9.
As the eurozone crisis escalates, particularly around Greece, Finance Minister Michael Noonan and Central Bank governor Patrick Honohan begin secret discussions about contingency planning in case the euro collapses. Two teams of officials are set up to oversee the project.
Meetings in Central Bank between the teams step up intensity. Previously unfathomable things "are now being openly discussed", a source says. Issues being examined include: how customer deposits and securities held in euro would be handled under a new currency, what monetary rules would apply, and would the currency be floated? Would it be "pegged" to another currency, including Sterling?
"Some talks" take place about the need for "additional currency printing" capacity.
British Chancellor George Osborne said his government has contingency planning in place in the event of the break-up of the euro.
Fresh concern in Dublin increases as Spanish bond yields spike and Spain looks set to need a bailout. Panic over the security of currency escalates.
Discussions in Dublin now mired in legal and financial landmines relating to how new currency would work. "No option being thrown up is pretty," says a source.
After Greece, Ireland and Portugal, Spain is now the major concern for the euro-zone. Interest rates on Spain's 10-year bonds reached the 7 per cent limit level and it faced difficulty in accessing bond markets. On June 9, 2012, Spain gets a financial support package of up to €100bn. The Irish Central Bank realises that similar contingency plans are being developed by Governments across Europe. The Germans in particular concluded a euro break up would have been "too catastrophic to consider".
A real 'game-changer' occurs when on July 26, new ECB president, Mario Draghi, commits to do "whatever it takes" to save the euro.
Days later, on August 2, the ECB's Governing Council announces a major change in strategy, referred to as Outright Monetary Transactions (OMT). This massive show of support for the currency involved buying national debt on secondary markets.
The impact of OMT and Draghi's policy eases pressure on currency, but threats still remain. Proposed banking union and the finalisation of the primary European Stability Mechanism (ESM) bailout fund reduces interest rates and propels stock markets.