ECB ‘insisted’ taxpayers repaid Anglo debts

The ECB has officially acknowledged that it insisted on Irish taxpayers repaying all the €31bn owed to Anglo Irish bondholders to protect Europe’s banks.

Jörg Asmussen, one of the six members of the bank’s executive board, admitted this in an aside during a speech he gave in Dublin last week.

However, the formal version of his speech on the ECB’s website only mentioned the need to “ensure no negative spillover effects” to Irish banks.

However, following an internet campaign over the weekend pointing out the omission, the ECB decided yesterday to include his reference to “banks in other European countries”.

A spokesperson said the reference had not been intentionally excluded and the script had been clearly marked “check against delivery”. Mr Asmussen had added in the reference to banks in the rest of Europe when he was delivering the speech.

“Nobody ever had doubts that there could be a contagion effect — no one can measure and describe it exactly — but we all know it exists especially after Lehman [Brothers, the US bank which collapsed and set in motion the chain of events leading to the credit crisis],” the spokesperson said, adding that Mr Asmussen had spelt it out clearly.

“The EU has provided help to Ireland in return,” he said. This point was made by Mr Asmussen several times during his speech when he stressed the amount of day-to-day funding the ECB was giving the banking sector.

While the IMF was willing to allow Ireland burn bondholders, the ECB and European Commission were adamant that all investors must be repaid in full, including hedge funds that picked up the bonds at a fraction of their face value. They have argued that not to do so would undermine the country’s credibility among investors and make returning to the markets to borrow for state spending more difficult.

At the time, however, there was much criticism that the decision was being pushed by Germany in particular, because there was substantial German investment and many of their lander banks were in difficulty.

Mr Asmussen referred to the fact that repayment of Anglo bondholders had been controversial. “It is true that the ECB viewed it as the least damaging course to fully honour the outstanding senior debts of Anglo. However unpopular that may now seem, this assessment was made at a time of extraordinary stresses in financial markets and great uncertainty. Protecting the hard-won gains and credibility from the early successes in 2011 was also a key consideration, to ensure no negative effects spilled over to other Irish banks or to banks in other European countries.”

Mr Asmussen was chief secretary at the finance ministry in Berlin when in January, he replaced fellow countryman Jürgen Stark who resigned in protest over the ECB’s bond-buying policy. He is responsible for international and European relations in the ECB.