The Government’s decision not to burn the junior bondholders has since paid off, European Central Bank president Mario Draghi insisted when questioned by Irish members of the European Parliament yesterday.
The blame for the economic crisis lies fully with the country and the decisions taken by the government of the time, he told the Parliament’s economics committee during a session of devoted to the ECB’s role in the crisis.
But despite a broadside from three Irish MEPs, including a description of the ECB as an arsonist, Mr Draghi did not rise to the bait, describing the ECB as the fire brigade in Ireland’s economic meltdown.
Fine Gael MEP Brian Hayes said suggesting the total responsibility for the crisis was home-grown “is unfair and a gross distortion of what happened” and the ECB should recognise that their “failure to allow a write-down of unsecured and unguaranteed creditors twice was a terrible mistake”.
Independent MEP Marion Harkin asked if the ECB favoured the bailout fund, the ESM, taking over the costs of the promissory notes.
Mr Draghi did not answer but said the ESM bank recapitalisation subsequently agreed was “fairly unlikely to be used at a time of crisis”, given the four conditions that needed to be fulfilled.
Sinn Féin MEP Matt Carthy said the ECB had directly interfered with Ireland’s sovereignty, forcing Irish people to bear a disproportionate share of the cost of the crisis. “The ECB was not a fire fighter, it was one of the arsonists,” he said.
Mr Draghi said: “We should not forget that the banking crisis was entirely home made,” with addict banks relying heavily on emergency liquidity which had to be approved by the Irish Central Bank, and the government issued the blanket guarantee without consulting any other member of the monetary union.
Private investors had already lost €43bn and bailing-in the unsecured creditors for a relatively small sum of €4bn would have been highly disruptive. The decision was vindicated when confidence returned, restoring market access for Ireland, he said.
He suggested that the bank may not continue to be part of the troika with the IMF and the European Commission that oversaw the bailout of Ireland, Portugal, and Greece.
AJ Chopra, who represented the IMF in Ireland’s bailout negotiations, criticised the ECB’s involvement and earlier this week told Irish MEPs the ECB should have been sitting alongside Ireland, not across the table.