Stephen Donnelly: We had the right to know about Trichet's bank threat
There might be a legal case to be taken against the ECB for overstepping it's legal mandate, writes Stephen Donnelly
This week the Banking Inquiry report was launched, and one of the most important lines in it is this: 'The withdrawal of Emergency Liquidity Assistance, ELA, was used as an explicit threat to prevent the Government from imposing losses on senior bondholders in March 2011.'
ELA was money the European Central Bank, ECB, loaned to Irish banks after the credit crunch in 2008. With Irish developers unable to pay back their loans, the Irish banks didn't have the cash to pay back their own loans to international investors - the bondholders. The ECB poured money into the Irish banks at very low interest rates to plug this gap and keep them open.
So in threatening 'the withdrawal of ELA', the European Central Bank was in effect threatening to collapse the Irish banking system. It's worth recalling that not only were we, the Irish people, being forced to cover the losses of international investors, we were also being forced to pay them the profit they would have received, had their investments not turned sour - because not only did they get their money back in full, they got paid all of the interest payments as well.