ECB boss Draghi on bank's role in Irish bailout: “Don't blame fire damage on the fire brigade”
European Central Bank (ECB) president Mario Draghi has dismissed criticism of the ECB’s role in Ireland’s bailout.
Appearing before the European Parliament in Brussels, Mr Draghi said it was wrong to “blame fire damage on the fire brigade”.
Mr Draghi blamed the crash on the Irish banks and the Irish government, and added that while the ECB and the EU have extensive powers to use if a country needs a bailout today, back in 2010 there were very few concrete steps the bank could take.
"Let's not forget the whole banking crisis was entirely home made. It was exacerbated by a series of decisions taken by the government of the time, and taken before the ECB got involved," he said.
"At that time there were no clear rules about bail-in, and there were no precedents, so there was no idea of what the order of precedence should be. This contributed to making financial markets more fragile. The ECB is in favour of burden sharing now, but the necessary precedents to facilitate a bail-in were missing [in 2010]," he stated.
"The formal burning out of senior bond holders was not a decision taken by the ECB but taken by the Irish government. The ECB advised in that direction, but didn't have the authority or means to impose this decision," the ECB chief said.
He said it was "very difficult to judge actions taken at the time with the eyes of today".
He went on to emphasise the role the ECB played in improving the banks’ health.
"There was some concern the banks would need more capital, but the ECB assessment was that they would need less than expected. This led to a rise in confidence in the Irish banks and when this confidence was returning the ECB thought it would have been highly disruptive to bail in €4bn when €43bn was already lost," he stated.
"The bail in later foreseen was €2bn because Irish authorities wanted to exempt two Irish banks, with a potential high cost in confidence in the Irish programme.
“The key issue was restoring market access - and thanks to the sacrifices of Irish people and the completion of the programme this was the beginning of a 100pc success story which all the Irish people should be proud of,” he added.