Saturday 7 December 2019

Banking inquiry: 'Trichet made no direct threat - he just pointed out risks' - Noonan

Michael Noonan with Jean-Claude Trichet in Brussels. REUTERS/Thierry Roge
Michael Noonan with Jean-Claude Trichet in Brussels. REUTERS/Thierry Roge

Fionnán Sheahan and Cormac McQuinn

Finance Minister Michael Noonan says "no direct threat" was made by the European Central Bank about the burning of bondholders.

Mr Noonan also says negotiating with the ECB on debt reduction was worth more to the country in the long run.

The Banking Inquiry's report finds the warning of a withdrawal of emergency bank funding was used as "an explicit threat" by then European Central Bank president Jean-Claude Trichet.

In March 2011, after coming into office, Mr Noonan spoke with Mr Trichet about not paying bank bondholders.

Mr Trichet is reputed to have said "a bomb will go off" in Dublin if the bondholders were burnt.

Mr Noonan is now facing calls to resign, amid claims he misled the Dáil over the former ECB boss's warning not to burn bondholders.


But the Finance Minister says there was no direct threat from the ECB and Mr Trichet was pointing out the market reaction to such a move.

"Jean-Claude Trichet made no overt threat. But he pointed out to me an awful lot of risk: everything from the financial services sector in Dublin mightn't get funded to the fact that Ireland would be in default. But I pointed all that out to the inquiry," he said.

"There was no direct threat but there was certainly enough in the conversation for me to understand that if I was to proceed without his consent, without the consent of the people in Frankfurt, that I was putting my country at extreme risk.

"So now you could say that's a threat or that's not a threat. He didn't say: 'If you burn the bondholders, I'll do this', which would be a threat. He said: 'If you burn the bondholders there'll be consequences for Ireland'. But he didn't say he'd be the person causing the consequences," he added.

Mr Noonan rejects suggestions he misled the Dáil.

"I don't have anything to correct because what I said in the Dáil was absolutely true," he said.

Mr Noonan referred to a document from the National Treasury Management Agency in the Banking Inquiry report that said Ireland would have saved €9bn.

He says other advice said it was worth only half that amount. And he insisted burning bondholders would have killed off the chances of more valuable debt deals.

"I mean, if we had succeeded we would have got nothing subsequently. We would have taken away our negotiating position," he said.

"The subsequent negotiations on the promissory note, the interest rates and so on, delivered an awful lot more than €9bn to Ireland. So by proceeding and by, you know, not burning the bondholders, it worked out in the end more beneficial to Ireland than if we had burned the bondholders," he said. Mr Noonan praised the work of the Banking Inquiry, saying the findings seemed "reasonable".

"Once the referendum was declined or shot down back in 2011, and once the proposal that committees of the Dáil would have additional powers to do a fuller inquiry. Once that was rejected by the people, the guys who were in there had difficulty.

"Given the circumstances and given the legal position, I think they did quite well.

"I think the important documents are not so much the report but the statements of evidence and the supplementary documentation which is there."

Social Democrats TD Stephen Donnelly called on the Finance Minister to resign. Mr Donnelly says that in November 2011 he asked Mr Noonan in the Dáil if any threats were made to withdraw liquidity, with the minister denying that any such threats were made.

The Wicklow TD claimed that Mr Noonan's response "is unambiguously misleading the Dáil on a matter of national importance".

Mr Donnelly said that this would be a "resigning issue" in other countries - but that here he believed the matter would be "brushed off by Fine Gael".


His remarks came as the Dáil debated the report of the Banking Inquiry where former Labour leader Pat Rabbitte made his last speech to the house as he is not contesting the general election.

He took a swipe at Mr Donnelly, who previously worked at economic consultants, McKinsey and Company.

Mr Rabbitte said all young TDs should do "a few months" there.

"It does wonders for one's self-confidence, if not for one's economics or one's attendance at committee meetings," he said.

Tánaiste Joan Burton said an important element of the inquiry was that the witnesses were questioned in public.

"The people responsible for the destruction of the economy and the near-ruin of our State were brought into the glare of public scrutiny to answer questions that people wanted asked," she said.

Fianna Fáil finance spokesman Michael McGrath said he remains of the view a "non-political inquiry would have been preferable".

Irish Independent

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