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Cowen breaks silence on guarantee

Former taoiseach Brian Cowen has defended his government’s blanket bank guarantee in 2008 but said it should have raised taxes and cut spending.

In his first public comments since leaving office, Mr Cowen said in a speech given at Georgetown University in the US that his government felt it would get "one shot" at calming the markets.

"Whether a narrower guarantee would have staved off an implosion of the banking system at a lower cost to the state is a matter for economic historians to ruminate on. We had to deal with this crisis in real time. Our view at the time was that we would get one shot at calming the markets."

In the speech made last week but published for the first time yesterday, Mr Cowen admitted mistakes were made under his leadership, but said European opposition to burning senior bondholders or allowing banks to fail had limited the scope for action.

"The euro area policy of ‘no bank failures and no burning of senior bank creditors’ has been a constant during the crisis. And as a member of the euro area, Ireland must play by the rules," he said.

Mr Cowen also said regulation of the banking sector during the boom was "complacent and permissive".