Dismissive Trichet shows true colours

The departure of Patrick Honohan from the Central Bank caps a week where the Irish public saw the true reality of central bank independence.

Dismissive Trichet shows true colours

First, Jean-Claude Trichet. As the head of the ECB at a crucial juncture for the Irish economy, he was always someone who was going to have to be involved in the Oireachtas Banking Inquiry. A problem he faced, and it is an unpalatable but real one, is that the ECB is (nominally) independent.

It does not report to anyone, really. Maybe Berlin. That is the nature of a central bank that is designed to not be simply a soft touch for a broke government.

Lets leave aside for a moment that the ECB has only slowly, haltingly and seemingly grudgingly taken on board the trappings of a real central bank. Trichet was never going to talk to the Oireachtas and be seen to be held in some way accountable.

The Institute of International and European Affairs (IIEA) compromise was perhaps the best that could be achieved.

That said, whoever agreed to the layout should hang their head in shame. A patrician, dismissive, tetchy Trichet literally looked down on a penitent row of humble petitioners.

He fairly and squarely blamed the mess on us, and the guarantee on the shoulders of former Taoiseach Brian Cowen. The late Finance Minister Mr Brian Lenihan was called a liar. The ECB did nothing wrong. Ever.

He didn’t answer many questions and more astonishingly wasn’t asked about the ongoing waste that is the promissory note.

He was unaware of the details of the imminent collapse of Anglo and seemed even in retrospect not to care. No roman proconsul attending a meeting of a local town council as the natives complained about some sheep stolen by the legions could have been as dismissive.

However, that is what an independent central bank (or monetary authority) does. It rides over and above local concerns. Veni, vidi, vitavi.

The lack of any democratic control, oversight or even feedback to the ECB was laid bare on Thursday. We should be in no doubt as to our place in the world.

We didn’t matter, all that mattered was our potential for causing trouble via bonds, which of course the ECB merely suggested, hoped, desired, we not burn. Veni, vici, voluit. Ever helpful, we took on board the suggestion and have been paying for it ever since.

We also saw the lack of democratic oversight in action with Patrick Honohan. In the heady days when the IMF was camped in the 5-star Merrion Hotel getting increasingly concerned at our profligate ways, he came on the radio and cut the Government off at its elected, bumbling, clownish knees and announced we should enjoy the luxury brand flakes as it was thin gruel from thereon in.

That may have done the state some service in assuring us that at least one senior official was conscious but it perhaps was not his place (although someone had to).

Throughout the bailout he spoke the truth, and that is something we should appreciate. Too much of the ruin we saw emerged from the lack of independence of the central bank. A long history as the Dame Street retirement home of the Department of Finance eviscerated its limited independence.

Honohan’s appointment marked a sea change, and it was clear that he took the remit seriously. We saw recently a faceoff on mortgages. He didn’t back down (at least not all the way) in the face of severe, un-evidenced, politicised government interference.

It is hard to imagine many of his predecessors acting the same way. Whatever about the European stage, domestically he was a strong and independent banker. These two issues show the tension. We need independent central bankers to stand up to the worst instincts of populism.

Veni vidi. That though is neither popular nor politic. What should be the case is that the independent central banker is humble (not a trait one could accuse Jean-Claude Trichet of possessing) and as open as possible as early as possible.

If we cannot have oversight then we must settle for hindsight but it should be delivered early and openly. Not late, grudgingly and haughtily.

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