Fianna Fáil Finance spokesperson Michael McGrath has said that the publication of correspondence from the former ECB President Jean Claude Trichet demonstrates the extraordinary pressure placed on the government of the day to enter in to an EU / IMF bailout programme and to commit to guaranteeing the emergency lending the Irish banks had undertaken from the ECB.
Deputy McGrath stated, “I believe the correspondence which has been published clearly shows that the ECB strayed into areas of policy which should have been reserved for the democratically elected Government of the State and the EU Commission.
“While the letter demanded Ireland undertake “decisive actions in the areas of fiscal consolidation, structural reforms and financial sector restructuring”, this was already very much underway. As of November 2010, Ireland had already embarked on a very significant fiscal adjustment with approximately half the measures ultimately implemented already taken. It was entirely inappropriate at that stage for the ECB to make its emergency lending to the Irish banks, which itself was designed to stave off a wider Eurozone crisis, contingent on Ireland entering a bailout.
“Following the expiration of original bank guarantee in September 2010, the ECB acted to prevent Ireland from imposing losses on senior bondholders. The ECB was clearly of the view that the Irish state should bear the majority of the cost of the Irish banking sector collapse while preventing losses being imposed on senior bondholders. The threat to cut off liquidity from the Irish banks was in essence a threat to force Ireland out of the Euro. The Government was essentially left with no choice in the matter. I believe this threat was a clear breach of the obligations of the ECB to act in the interests of all the citizens that use the Euro, not least those of Ireland.
“It is imperative now that Mr Trichet agrees to appear at the forthcoming banking inquiry. As Head of the ECB, he was central to the events that unfolded not least the decision not to impose losses on senior bondholders and Ireland entering an EU / IMF programme. His previous statement that “all decisions are taken collectively by all members of the (ECB) Governing Council, and the responsibility of explaining decisions (is) in the hands of national governments” does not address the widespread desire amongst the Irish public for an inquiry that full pursue all facts and question all relevant witnesses.
“Today’s revelations also put the issue of the promissory note arrangement and the case for a retrospective recapitalisation of the banks once again in the spotlight. Ireland needs to make it clear to the ECB that we are not going accede to any demand from the ECB that the Irish Central Bank accelerate the sale of the bonds it issued following the promissory note deal. The longer these bonds are held by the Irish Central Bank, the more it reduces the cost of rescuing. There is now an overwhelming moral case for Ireland to be allowed hold these bonds indefinitely and for action to give effect to the June 2012 summit statement on breaking the link between sovereign and bank debt.”