FF should have stood up to ECB

Fianna Fáil has admitted it should not have allowed itself to be "threatened" by the ECB in the run up to the €67.5bn EU/IMF bailout in November 2010.

Party finance spokesman Michael McGrath said correspondence published yesterday shows Brian Lenihan was under pressure as the ECB attempted to “overstep its remit” in forcing the bailout terms.

“We shouldn’t have allowed ourselves to be threatened in the way that we were by the ECB,” said Mr McGrath who disputed the ECB’s claim that Ireland was not pushed into accepting the bailout.

He said the “one major thing that should have been done differently” was that losses should have been imposed on senior bondholders, something he said the ECB would not allow.

“What would have happened if the Government had challenged them and said ‘no we are not applying for a formal programme’? It’s very hard to say. We certainly could have kept going for a number of months longer, but ultimately with the cost of borrowing the way it was, it was an extremely difficult situation.”

Meanwhile, an opposition TD has claimed the bailout letter from Jean-Claude Trichet was leaked by the Government in order to try and distract attention from Irish Water. Independent Catherine Murphy made the claim at leaders’ questions as she insisted the Government should use the revelations to push the ECB on recovering bank debt.

“The cynical timing is about one thing, namely, knocking Irish Water off the headlines and out of the front pages of the newspapers... The Trichet letter clearly shows that the ECB bullied this country into a bailout on its own terms. Some €30.6bn was pumped into two non-solvent banks, Anglo Irish Bank and Irish Nationwide. The loan losses were then converted into sovereign debt by this Government, leaving us with a €25bn debt to pay before interest is added.”

She accused the Tánaiste of evading questions on whether the revelations in the letter would alter the Government’s negotiating stance with the ECB in terms of legacy bank debt.

Ms Burton said she found the letters “poignant” as they were dealt with by her late constituency colleague Brian Lenihan.

Noting that Ireland had taken a “hit” for the eurozone, she said the letter’s publication would aid the Oireachtas banking inquiry.

The chairman of that inquiry, Ciarán Lynch, said he had no idea if the letter had been deliberately leaked.

“It will certainly help the inquiry and the letter raises a series of questions that the inquiry should examine,” he said. “Were these letters inevitable or avoidable?”


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