Trichet regrets nothing about ECB ‘advice’ during crisis

The Oireachtas banking inquiry did not sit in the Royal Hospital Kilmainham yesterday. It did not hear from a witness by the name of Jean Claude Trichet, the former head of the European Central Bank (ECB).

At times, the event looked like, walked like, and quacked like a banking inquiry, but it most definitely was not the real thing. To suggest otherwise would be to offend our economic overlords in Frankfurt.

The process by which Mr Trichet submitted to questioning from members of the banking inquiry was one further indication of the subservient role of this country in the architecture of the single European currency.

ECB functionaries have appeared before parliamentary committees in Germany and Italy. However, for some reason, this was not possible for a member state that is owed a few answers from the institution.

Instead, members of the inquiry had to attend an event at which Mr Trichet was speaking, and ask their questions in a manner that could never, ever be mistaken for as parliamentary inquiry.

Mr Trichet sat on a raised stage. The TDs and senators had front-row seats, behind small tables, as if they were judges in some ludicrous talent show. Perhaps the event could have been called The Vice Of Ireland, featuring Mr Trichet belting out a rousing rendition of ‘Je Ne Regrette Rien’.

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And what did we learn? Only that there was nothing new to learn. Well, for one thing we were told we’ve got the wrong end of the stick. Far from hovering over this country as it was going down the tubes, issuing threats and demanding that we take one for the team, the ECB was actually our best friend.

For instance, Mr Trichet insists that the ECB issued no instructions that Ireland could not burn senior bondholders. It merely advised.

“The ECB view was and still is that a number of factors made this option extremely risky for Ireland,” he said. “Let me stress that the ECB simply gave advice on this issue. The ECB doesn’t have the authority to give instructions.”

This, to some extent, contradicts Michael Noonan’s claim that the Government was thwarted in its attempts in 2011 to hold back on shelling out to the bondholders who had gambled on the Irish property bubble. That, of course, depends on whether “advice” can be interpreted as a threat when the party offering advice is holding a big stick at the same time.

The inquiry members probed and prodded, looking for something that would show that the ECB had done this country down in one way or another.

Senator Susan O’Keeffe asked him about a claim that Mr Trichet had left a voice message for Brian Lenihan in the days prior to the guarantee, warning not to let any banks go bust.

“No message to Brian, no message to government of Ireland but we are telling all governments don’t do again Lehman’s Brothers.”

This was a reference to the American investment bank that had collapsed some weeks before, sending shockwaves around the world.

There were also questions about how closely the ECB was monitoring the banks in this country in the years prior to 2008.

Mr Trichet made it plain that, in his opinion, it wasn’t the job of the ECB to keep an eye on how the banking bubble was heading for a big burst.

“We pointed the finger and we made the big remarks,” he said. “But we had no responsibility in banking surveillance.”

He batted away most of the questions with ease. Well he might, considering he was given the questions in advance, something that would never have been countenanced if he were a proper witness.

Halfway through the parliamentarians’ questions, there was a break in order to take questions from the floor about European issues. This was another little feature to ensure that nobody could be under the impression that Mr Trichet was a witness at a parliamentary inquiry.

What did emerge is that Mr Trichet and his colleagues felt they bent over backwards to help Ireland throughout the crisis.

“I have in my mind [at the time] 15 countries and many, many issues...at the time our help to Ireland represented 100% of GDP of Ireland.”

Time and again, he referenced the banking collapse as “the drama”. Joe Higgins has a capacity at this banking inquiry to ask a question to which the man in the street can readily relate. He asked Mr Trichet whether the ECB’s assistance was focused on “saving the Irish people or the big European institutions”.

“You have a very good question,” Mr Trichet replied.

“The only issue is would we have been better off, for our citizens, if we had the Great Depression of 1929, which it would have been. All governments, without any exception, all considered it would have been much more dramatic and was good for us to avoid the dramatic Great Depression. But I agree with you. Never again.”

By the end, the members of the inquiry had not learned much of substance, but everybody was more enlightened as to the attitude of executives in the ECB.

While most comment in this country has concerned the ECB’s role in pushing the country into the bail-out, and preventing any bonfire of bondholders, Frankfurt sees things differently.

As far as the ECB is concerned, Ireland got a dig-out that was vastly disproportionate to its size.

The small island nation on the western tip of the single currency territory was sucking out a quarter of all ECB emergency funding at one stage. And, if Mr Trichet’s tone is anything to go by, the ECB honchos are a little sore at the lack of gratitude. Two perspectives: One from the centre of the European power structure, the other from the fringes. Little has emerged so far to suggest the gap between them will be bridged any time soon.

READ MORE: Trichet: I did not force bailout on you

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