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Lenihan's letters show how close we came to brink

THREE brief paragraphs written by former Finance Minister Brian Lenihan led this country into a regime of grinding austerity.

The letter, written on November 21, 2010, formally requested a bailout from the Troika of the European Commission, the International Monetary Fund and the European Central Bank.

It is addressed to EU Commissioner Olli Rehn, Dominique Strauss-Kahn, the disgraced former head of the IMF and Jean-Claude Trichet, then president of the ECB.

It was one of two letters written by Mr Lenihan on the same day as Ireland stared into a financial abyss.

The letters give some insight into what Mr Lenihan was thinking on the day the Government accepted it could no longer operate as an independent State and required a bailout.







Pressure

The letters neither confirm nor deny claims that Mr Lenihan was somehow bounced into a bailout request by Mr Trichet to prevent the Irish banking crisis engulfing other EU countries.

They have been released as Taoiseach Enda Kenny fights to find a way out of reducing the €64bn bank debt which ultimately led to us needing outside assistance. This week German Chancellor Angela Merkel and French President Francois Hollande said Ireland was "a special case".

Mr Kenny hopes that European money can be injected in our banks so that the so-called legacy debt will not continue to be fully funny by taxpayers' money.

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 were discussed endlessly. Dozens of IMF and EU officials were already in Dublin urging a bailout that had been resisted by Taoiseach Brian Cowen. Mr Lenihan's second letter, to Mr Trichet, stretches to three pages and tells Mr Trichet that a request for a bailout will be made.

It conceded the Government under Mr Cowen had taken a "grave and serious decision" to seek assistance from the Troika of international lenders.

It was written in response to one that Mr Trichet sent to Mr Lenihan two days previously in which he urged the Finance Minister and his Government colleagues to accept the necessity for a bailout and agree to a programme with the Troika.

Mr Lenihan wrote: "There comes a point at which negative sentiment starts to feed on itself, even independently of underlying realities and we are clearly at that point." The Finance Minister set out a strong defence of the Government's actions since the banking crisis erupted in September, 2008.

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