Revealed: Lenihan letters that showed world Ireland just couldn't manage
TWO letters by late Finance Minister Brian Lenihan in the days leading up to Ireland's bailout, including the formal letter requesting it, were released yesterday.
The letters, both written on November 21, 2010, give some insight into what Mr Lenihan was thinking on the day the last government decided to seek aid.
The letters were released after the European Central Bank said it had no problem with the publication following a freedom of information request from reporter Gavin Sheridan.
The Department of Finance had refused previous requests from Mr Sheridan and still declines to publish crucial letters from former European Central Bank chief Jean-Claude Trichet in the lead-up to the bailout.
The letters neither confirm nor deny claims that Mr Lenihan was somehow bounced into a bailout request by Mr Trichet.
Some sources claim Mr Trichet put immense pressure on Mr Lenihan, but the tone of Mr Lenihan's two letters is friendly and he goes out of his way to thank Mr Trichet for advice given "personally and courteously in recent days".
The letters were written at the end of a chaotic period when Ireland's problems had been discussed endlessly at global conferences.
Dozens of IMF and EU officials were already in Dublin urging a bailout that had been resisted by Taoiseach Brian Cowen.
The letter requesting a bailout is only three paragraphs long and is addressed to Mr Trichet as well as International Monetary Fund boss Dominique Strauss-Kahn and European Economics Commissioner Olli Rehn. It simply informs them formally of the Cabinet's decision to seek a bailout.
The second letter stretches to three pages and tells Mr Trichet that a request will be made. It also attempts to provide some sort of background to the "grave and serious" bailout request and acknowledges the ECB's fears about the huge sums of money the Central Bank had lent to Irish banks.
In it, Mr Lenihan defends his various attempts to support the banking sector and recapitalise the banks. The letter insists the recapitalisation process was comprehensive and blames the markets for failing to believe the Irish Government and banks about the scale of future losses.
Mr Lenihan tells Mr Trichet that he was "very pleased" that an examination of the banks' balance sheets had not revealed further problems.
He also appeals to Mr Trichet to make public statements supporting Ireland's liquidity "to help to reassure the market on this crucial point".
See business section, Page 10