It wasn’t just Joe Public kept in the dark
That, at least, is the picture that seems to be emerging now that the smoke around the bailout has cleared somewhat. It comes with a cautionary note attached, however: it’s been a week full of spin, and there may be further dissembling at play. Still, it is worthwhile noting how the situation unfolded and analysing why it unfolded that way.
The bailout speculation sprung from international media reports beginning on Friday of last week. Citing “official sources”, news agency Reuters said Ireland was in talks about a rescue package. The next day, the BBC followed suit.
Both stories quoted Government denials. Ministers were then dispatched over the weekend to stress this. Justice Minister Dermot Ahern did so most aggressively of all, telling RTÉ on Sunday that talk of a bailout was “fiction”. That pattern was more or less repeated until Central Bank governor Patrick Honohan gave a frank and candid radio interview on Thursday. The EU, European Central Bank, and IMF teams being dispatched to Dublin were coming to determine what kind of rescue package would be needed. Prof Honohan envisaged it would take the shape of a loan running into “tens of billions”. Now, at last, an Irish official was giving the public the truth.
The departments of the Taoiseach and Finance were furious, because in their eyes, it was a mistake to concede that a bailout was necessary before formal negotiations had begun. One source diplomatically said there was “surprise” at Prof Honohan’s interview. There was much more than that. To start with, the Government privately believed the ECB had been the source for the media speculation, as it wanted to “bounce” Ireland into accepting a bailout. (This was because the ECB wanted to end the situation whereby the Irish banks were dependent almost solely on it for funding). Now, the Government believed that Prof Honohan was doing the ECB’s bidding. Mr Cowen himself more than hinted at such, saying: “The Central Bank governor is part of the governing council of the ECB and it has been a matter of public knowledge what the ECB’s general view has been.”
Those who know Prof Honohan would say he does nobody’s bidding. Regardless, that was the view within the Taoiseach and Finance departments. They were angry at the ECB. They were angry at Prof Honohan. But they weren’t the only ones angry.
According to sources (none of them in Dermot Ahern’s camp), ministers were, at best, drip-fed information by Mr Cowen and Mr Lenihan over the weekend. Yes, there were technical discussions between officials going on, they were told. But no, Ireland wasn’t seeking a bailout and hadn’t applied for one. While technically this was true, it was also arguably misleading. But ministers took what they were told and duly appeared on media to insist a bailout wasn’t on the horizon. When the truth emerged, they were almost as surprised as everyone else. Or so these sources say. Speaking to advisers this week, one was sanguine, despite the fact his own minister had to scramble to find out exactly what was happening. You have 15 people at cabinet, he said, and if you tell all 15, that means their immediate staff know too, bringing the circle closer to 40. “And in this town, how are you going to keep that quiet?” he asked. But another adviser expressed fury at the way things were handled by Mr Cowen and Mr Lenihan. He also claimed there had been a “complete failure” to implement a “crisis communication strategy”. So there isn’t just a public inquest into what happened this week. There’s clearly a private inquest too.
