Business Irish

Thursday 18 January 2018

Jean-Claude Trichet interview: 'Ireland was supported more than any other country by far'

Jean-Claude Trichet was the controversial head of the European Central Bank that "bounced" the late Brian Lenihan and Ireland into its €85bn Troika bailout in late 2010. In an exclusive interview with Political Correspondent Daniel McConnell, he takes issue with the strong criticism of the ECB from within Ireland, insisting it was given "fantastic" support by his bank. He also says Ireland was not singled out for punishment and that he has not yet been asked to appear before the planned Oireachtas banking inquiry

Daniel McConnell: Mr Trichet, good afternoon. May I begin? Will you agree to appear before the newly formed parliamentary inquiry into Ireland's banking crash, if requested by Irish politicians?

Jean Claude Trichet: "Until now, I received no such request from Ireland. The rules in the ECB are that, all our decisions being collegial, the president goes to the European parliament and the Governors of Central Banks go to the National Parliaments. I will add that my personal understanding is that Ireland has taken the appropriate decisions in this past period of extremely difficult circumstances."

DMC: "It has been reported in a recent book, The Price of Power by Pat Leahy, and by our Finance Minister Michael Noonan, that you trenchantly opposed the idea of the Irish Government imposing losses on senior bondholders in Anglo Irish Bank in 2011. Is this true? If so why?

JCT: "My response to your question, first of all is . . . we had the same message to all countries. Because they all had enormous banking difficulties. Whether Germany, Belgium, Ireland France . . . same message. The message was for all of them – when you take any decision, take into account all dimensions of these decisions, including the systemic aspects of these decisions. To be clear, it was the same in London, the same in Washington and all central bankers across the world, at least in the advanced economies, were sending the same messages. The decision finally taken by all at that time in the post-Lehman years was not to let any particular commercial bank go bankrupt as Lehman had done."

DMC: "But what about Ireland?"

JCT: "Same message for all. Ireland was seen from a general European perspective, it was a case where you had two characteristics. One was Ireland had given, it was the first country by the way in the advanced economies to give a general State guarantee to the banks, because of the fact that the balance sheets of the banks were absolutely gigantic. The Irish Government considered . . . the other governments followed up more or less. There was a special characteristic in Ireland. The second characteristic in Ireland was that it was by far, by very, very far, the country to which the euro system was supplying the biggest amount of liquidity, by far, very far as I said. So these were the two characteristics of Ireland. But for the rest, same messages for all.

"The message of the Governing Council of the ECB was the same for all countries without exception. They all had major financial and banking difficulties. The message was that it was important to take into account all dimensions of their decisions, including the systemic ones, when dealing with their banking problems. I insist: same language and same messages by the Governing Council for all countries.

"There was never a personal message but a message sent by the Governing Council as a whole, including all governors. By the way, an equivalent message was sent by the sister Central Banks in Washington, in London to their respective governments.

"Ireland had two characteristics that can be stressed. First, it was the first country giving a State guarantee to its banks. Second, it was by very, very far the country benefiting the most from a considerable amount of liquidity from the Euro system."

DMC: "But did you threaten to withdraw liquidity if Ireland tried to burn bondholders? The book also states that you, at the height of the drama in 2011,

had a phone conversation with Jens Weidmann of the Bundesbank to discuss Ireland's desire to burn bondholders. Why did you feel the need to have such a conversation with Mr Weidmann about another sovereign state?"

JCT: "First of all, there is nothing what I said that was not discussed with the Governing Council as a whole, including of course the Governor of the Central Bank of Ireland. All the other, and I see in your question a mention of a phone call with one individual President of the Bundesbank and so on. This is absolutely not true. It was with all in the Governing Council these issues were discussed."

DMC: "Including Governor Honohan?"

JCT: "Of course. The governor of the time, you know better. But all colleagues, all members of the Governing Council, including the governor of Ireland. The discussions took place with all govern-ors without exception, and not with one of them."

DMC: "If Ireland acted unilaterally, and burnt bondholders, was there a threat by you to withdraw emergency funding to Ireland?"

JCT: "The message was the same for all countries, all countries, without exception. And all countries reacted like Ireland. There was not a special case there in terms of their action with the Central Bank. Also, I wouldn't say there was any sort of quid pro quo. Lending to Ireland was in many multiples to what was being given to other countries. So enormous support and that is one of the reasons I am very surprised I have to say at this kind of discussion. The only thing that is absolutely clear, there was a fantastic support by the Euro system as a whole for Ireland."

DMC: "But, repeatedly the suggestion has been in the Irish media, and from the Irish political class, that if we acted unilaterally and burnt bondholders, they wanted to burn bondhold-ers and there was an explicit threat that emerg-ency funding would stop."

JCT: "That I will not say. What I will say, is that the same message for all. The message coming from the Governing Council at the ECB, was a collegial approach. And a fact is that Ireland was supported more than any other country by far. This question misses an important point. The Governing Council of the ECB had been, was and continued to be much more forthcoming, in terms of supply of liquidity, with Ireland than with any other country in the Euro system. My understanding is that the Government of the Ireland at the time assessed rightly the systemic consequences of the decision it has to take."

Sunday Independent

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