Documents show Lenihan forced to accept bailout

The late finance minister, Brian Lenihan, resisted pressure to accept a bailout until the final minute and hinted he did so because of pressure from the ECB.

Newly available documents show the minister formally conceded to the ECB that Ireland would apply for a bailout on Sunday, Nov 21 — the day before the government officially entered talks with the troika to agree a deal.

The acceptance is made in a letter from Mr Lenihan in reply to correspondence he had received from the president of the ECB, Jean-Claude Trichet, two days earlier, on Nov 19. Mr Trichet’s letter has not been publicly released, but there are hints in Mr Lenihan’s response that it bounced Ireland into taking the bailout.

Mr Lenihan said: “In relation to points (1) and (4) of your letter, I would like to inform you that the Irish Government has decided today to seek access to external support from the European and international support mechanisms.”

Indicating he had been pressurised into it, Mr Lenihan said the “grave and serious decision” was “informed by your recent communication, and the advice you have conveyed to me personally and courteously in recent days”.

Mr Lenihan sent a second letter that day in which he formally requested a bailout. The IMF mission chief to Ireland, Ajai Chopra, had already been in Ireland for three days at that stage and, although talks had begun on the Friday, the Government did not concede it would apply for aid until the Sunday.

The acceptance also came three days after the Central Bank governor Patrick Honohan said on RTÉ’s Morning Ireland that a rescue plan involving “tens of billions” of euro was in train.

It was a full week after a succession of senior ministers — Dermot Ahern, Noel Dempsey, Batt O’Keeffe, and Mary Hanafin — strongly denied a bailout was under way.

In the letter, Mr Lenihan outlined to Mr Trichet the background behind Ireland needing a bailout including the Greek debt crisis, the slowdown in economic recovery nationally and negative market sentiment.

“Uncertainty about the status of bondholders in the event of access to external support added to instability.”

The day after the letter was sent, on Monday, Nov 22, the Green Party declared its intention to leave government.

Negotiations between the government and the troika got under way which took a week and culminated in an €85bn deal agreed at a meeting of eurozone finance ministers in Brussels on Sunday, Nov 28.

The Department of Finance had refused to release the correspondence between Mr Lenihan and Mr Trichet because of exemptions under freedom of information laws surrounding negotiations with international bodies.

It came into the public domain yesterday after the ECB gave it to thestory.ie, a website founded by transparency activist Gavin Sheridan.

More in this section