FF ‘wanted to burn bondholders’

Fianna Fáil has claimed confidential correspondence exists which would show the party wanted to burn the bondholders — but the ECB would not let them.

The party has demanded the Department of Finance release the correspondence it claims had been sent to the late Brian Lenihan, the former finance minister.

A letter from the ECB during negotiations on the bailout deal in late 2010 should be published for the historical record, finance spokesman Michael McGrath insisted.

He is adamant Mr Lenihan had been advised by the ECB that senior bondholders could not be burnt.

The Cork South Central TD also believes it would strengthen Ireland’s case in getting a better deal on the bank debt burden “if it is clearly seen Ireland took the losses at the insistence of the ECB”.

However, Michael Noonan, the finance minister, says he will not publish any such correspondence because it would possibly be a breach of trust.

Since negotiations on the bailout, the ECB has changed its attitude on the issue of forcing losses on senior bondholders.

President Mario Draghi met Mr Noonan in Frankfurt this month to discuss the issue after the minister suggested senior, unsecured, debtholders in banks being shut should be forced to take losses.

Mr McGrath said: “The time the bailout was being negotiated, Brian Lenihan did put the issue on the table but the ECB did hold the line that no senior bondholders would be hit.”

He claimed there was a letter in the department outlining this position.

It is too late for Ireland to benefit from any change as only about €160m in outstanding payments is owed to senior, unsecured, debt-holders in Anglo and Irish Nationwide — now IRBC.

Mr McGrath believes publishing correspondence stating the ECB’s previous position would be a help in strengthen Ireland’s case for better terms.

In response to Mr McGrath’s request to publish the correspondence, Mr Noonan said he has “no plans to publish records of the type described”.

“It is normal practice for states to protect the confidentiality of deliberations with international bodies, particularly when sensitive issues are involved,” he said.

Mr Noonan said the it would also be exempt from the Freedom of Information Act and that such an exemption was in place to “enable public bodies to protect the integrity and viability of the negotiations and decision-making processes and our relationship with international bodies”.