At the time the bank had lent a quarter of its liquidity to keep the Irish banks going, and the sum equalled 85% of Ireland’s total GDP. The level of support given to the Irish banks “had been extraordinary”, he added.
But the ECB will not formally take part in Ireland’s banking inquiry, and will discuss playing some kind of informal role, he told members of the European Parliament.
He was asked by Sinn Féin’s Matt Carthy in what capacity the ECB asked the Irish Government to go into a programme, as was revealed in four letters between the former ECB president Jean Claude Trichet and the then finance minister Brian Lenihan.
Mr Draghi forcefully defended the bank’s position. “When it involves 85% of the country’s wealth and one quarter of the ECB’s total liquidity, you want to make sure there is no systemic threat to the entire system.
“Don’t you think that the ECB should worry about that, have in place guarantees for those providing that liquidity? That is what the ECB has done.
“This was not some sort of irrational fact on the ECB side or an authoritarian act, but part of an over-all policy dialogue between the ECB and the Irish authorities, so much so that the Irish authorities asked for a programme”.
In line the ECB’s remit and rules, “there are limits to the support the euro system can provide to the banks”, he said and these were referred to in the letters, which were released 10 days ago.
“By early November 2010 the situation in Ireland had rapidly deteriorated and the governing council of the ECB had a duty to address it”, as Mr Trichet did in his letter of November 19, to which the minister replied, stating that he fully understood the concerns raised by the ECB.
Asked if he would accept that the ECB had been mistaken in directing Ireland not to burn the bondholders, Mr Draghi said the letters captured the developments very succinctly and clearly.
“The government guaranteeing of bank liabilities, the sheer scale of the crisis, the aggravating external factors, the loss of market confidence meant it was inevitable that Ireland would apply for a programme”, he said.
Fine Gael’s Brian Hayes told Mr Draghi that the Dáil’s banking enquiry “was not a witch hunt”, adding that it was important that Irish citizens learned the truth.
Mr Draghi said the ECB was accountable to the European Parliament so “as such we will not formally participate in a national parliament enquiry”.