Tuesday 20 February 2018

Cowen anger at how ECB plotted bailout

Ex-Taoiseach to reveal his belief Ireland was bounced into rescue

Brian Cowen
Brian Cowen
Daniel McConnell

Daniel McConnell

Former Taoiseach Brian Cowen will give a detailed account to the Banking Inquiry of his view that Ireland was bounced into the EU/ECB/IMF bailout, the Sunday Independent has learned.

In his second day of evidence this Wednesday, informed sources say Mr Cowen will leave the inquiry in no doubt as to his resentment at the manner in which pressure was put on his government.

It is understood Mr Cowen intends to set out in detail the seemingly chaotic events which ultimately led to the downfall of his government.

Sources say the former Taoiseach is preparing to reserve his strongest criticism for the former ECB president Jean- Claude Trichet, who threatened to withdraw crucial ECB funding at a key moment.

Read more: Cowen expected to blame ECB for bouncing Ireland into Troika bailout

It is believed he will offer a telling insight as to the treatment of bailout countries at a time when the Greek crisis continues to rage.

It is also expected to be revealed that the embattled Mr Cowen underestimated the impact of the IMF coming to town on the Irish people and international observers of Ireland.

He and former finance minister Brian Lenihan realised that images of Ajai Chopra and other officials walking the streets of Dublin immediately sent a message that this was now a done deal.

Read more: The five big tests McCreevy's inquiry evidence failed

Mr Cowen, who was Taoiseach between May 2008 and March 2011, sources say, believed Central Bank Governor Patrick Honohan's interview on RTE's Morning Ireland only further reinforced the perception that a bailout deal was imminent.

As the most central player on the night, Mr Cowen is to be pressed considerably on the night of the September 2008 bank guarantee.

He will be asked to deal with the issue of a difference of opinion between him and then finance minister Brian Lenihan on the nationalisation of Anglo Irish Bank.

The Banking Inquiry has heard that Mr Lenihan, and former Department of Finance official Kevin Cardiff, both favoured nationalisation as opposed to the broad guarantee ultimately introduced.

He will be asked about a private meeting he and Mr Lenihan held on the night, after which Mr Lenihan's mind appeared to have been changed.

Mr Cowen opposed nationalisation at that point and told Mr Lenihan and others present a limited guarantee seemed preferable than giving an open-ended guarantee which a full nationalisation would entail.

Read more: Set up for a fall, but slugger Cowen came out fighting

Despite the perception of a major row between the pair, Mr Cowen has confided in colleagues that their conversation was cordial.

In relation to the November 2011 bailout, Mr Cowen is expected to say that EU/ECB off-the-record briefings were trying to create a situation where a formal application for assistance was being portrayed as a done deal without prior agreement, which annoyed him.

It is expected he will say he did not like the continuous anonymous briefing against Ireland which he saw as an attempt to bounce Ireland into a decision before they had further clarification on the conditions attached.

However, Mr Cowen is expected to reserve his strongest criticism for former European Central Bank president Jean- Claude Trichet.

In November 2010, Mr Trichet sent a letter to Mr Lenihan threatening withdrawal of ECB funds in the absence of a formal bailout request. Mr Cowen is expected to say this letter was not well received by the government.

Read more: Banking Inquiry is a pointless waste of time

In relation to the night of the bank guarantee, September 29, 2008, the former Taoiseach is expected to detail how then Central Bank governor John Hurley, who attended the meeting, told of how a serious situation had developed into a system-wide crisis.

Last week Mr Cowen told the inquiry the position of the ECB was that no bank was to be allowed to fail because of the contagion effects that could ensure in the euro area. He made the point that the government would have one go at addressing the crisis and, if it did not work, may not get a second chance to revisit it as confidence would be gone. It is understood Mr Cowen will this week say the warning came from Mr Hurley and that this was significant in determining the night's events.

Mr Cowen is expected to say that allowing Anglo to fail was not an option on the night because it would have had implications for the whole system.

The costs involved of a run on other banks would put the whole payments system at risk and cause irreparable damage to the economy. Mr Cowen has already told the inquiry he was warned the wrong decision would "set the country back 25 years".

Read more: Cowen expected to blame ECB for bouncing Ireland into Troika bailout

Mr Cowen is also expected to confirm that during a break in the meeting, he decided to get an external view and rang Alan Gray, an economist and a Central Bank board member, who was someone whose views he respected.

Analysis Pages 18, 19 & 24 THE GREEK CRISIS PAGES 22-23

Sunday Independent

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