Thursday 18 July 2019

Noonan: Late Brian Lenihan 'was threatened' by Trichet

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

David Raleigh

The Minister for Finance has said he believes the late Brian Lenihan "was threatened" by former President of the European Central Bank, Jean Claude Trichet, that the ECB would not provide liquidity assistance to Ireland's banks, if the Irish government had burned European bondholders during the financial crisis.

Michael Noonan reiterated he was "not threatened" by Trichet, despite claims by Social Democrats TD Stephen Donnelly that the current finance minister misled the Dail when he said four years ago that no threat was made by the ECB.

"I did see correspondence where (Trichet) did seem to be threatening Brian Lenihan with pulling back emergency liquidity assistance to the banks if the bonds were burned back in 2010," Mr Noonan said.

"I presumed it was that, that caused the (banking) committee of inquiry to say that he threatened, but he didn't threaten me," Mr Noonan added.

The Limerick TD hit back at Deputy Donnelly who called for Mr Noonan's resignation over the matter last Wednesday.

"Stephen Donnelly is a poor attendee in the Dail," Mr Noonan said.

"And, he doesn't attend committees, so, he doesn't have a full picture of what goes on quite frequently," he added.

The Banking Inquiry found that the ECB had explicitly threatened to cut off funding for Irish banks if bondholders were burned.

Moving to clarify his remarks to the Dail four years ago, Mr Noonan said: "What I said in the Dail, I said again when I gave four hours of evidence before the banking inquiry...Mr Trichet did not threaten me."

"If Mr Trichet, as he did say, said 'a bomb will go off in Dublin' - that's a prediction.

"If, on the other hand, if Mr Trichet said that the European Central Bank will make sure that a bomb goes off in Dublin - that's a threat," Mr Noonan added.

"(Trichet) was predicting that, if we burned the bondholders, that the international markets would react in a way which would be of high risk to Ireland, and high risk to the financial services industry in Dublin, and high risk to the ability of the bank to give us ELA (Emergency Liquidity Assistance), but he made no specific threat to me," he further explained.

Mr Noonan said the department of finance has predicted growth rates significantly lower than what has been assumed by the Central Bank.

He said this would mean there would be money in the government coffers to help the country cope if there was another financial hit.

"We're working on an assumption of growth rates of between 3-3.5pc. That's significantly below what the Central Bank predicted last week, so the forecasts are quiet modest."

"We're not going to spend it all because there could be shocks."

Minister Noonan added: "We know there are some external risks and there are some internal risks. So rather than committing to spend everything, we want to put about a quarter of what's available for a rainy day fund." 

Online Editors

Also in Business