Saturday 21 April 2018

Central Bank had no Irish plan to deal with 'Grexit' nightmare scenario

The Central Bank
The Central Bank
Colm Kelpie

Colm Kelpie

NO formal risk assessment research was drawn up by the Central Bank of the possible effects on Ireland if Greece had crashed out of the euro last summer.

While the Athens crisis in the first half of the year was discussed by senior officials in Dame Street, no body of research or any discussion papers were drawn up formally examining the likely impact on Ireland of a Greek default, or exit from the single currency.

The bank said any contingency planning would have been done at European level - a view shared by the Department of Finance.

Athens entered into an €86bn bailout - its third rescue package - in August after protracted negotiations with Europe and the International Monetary Fund, pulling the country back from the brink of a crisis that threatened its future in the Eurozone.

A Freedom of Information request submitted by the Irish Independent to the Central Bank sought copies of any research or discussion papers prepared by the bank relating to a potential Greek default or exit, along with correspondence between Governor Patrick Honohan and deputy governors Stefan Gerlach and Cyril Roux in relation to those risks. The request, however, yielded nothing.

"The records concerned do not exist," the response to the FOI stated. A Central Bank spokeswoman, however, said the organisation had monitored the Greek situation closely.

"The Central Bank does not comment on any particular contingency plans it may have; however, as would be expected, the Central Bank has very closely monitored the situation in relation to Greece (on a daily basis, at times), primarily through its participation in the Eurosystem. It also liaised closely, as necessary, with the Department of Finance," the spokeswoman said.

It is understood that regular meetings took place within the Central Bank and there were regular "point in time" monitoring of exposures to Greece from both the State and the commercial banks by officials in Dame Street. But no formal examination of an actual exit or default was conducted.

In June, Finance Minister Michael Noonan said the Department of Finance, the National Treasury Management Agency and the Central Bank had been discussing a possible exit at a ''high level''.

A schedule of documents was released to this newspaper from the Department of Finance following a separate, similar Freedom of Information request.

The bulk of the documents were refused, but the schedule included one email referring to contingency planning, as well as a submission to the Economic Management Council. But it is not clear if a detailed formal assessment of a potential exit was carried out by the Department.

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