Banking Inquiry: State bailout was mooted ‘as early as October 2008’

Senior Department of Finance officials made “discreet” inquiries about how Ireland could enter a bailout as early as October 2008, the banking inquiry has heard.

The department’s former secretary general Kevin Cardiff revealed the situation during his second meeting with the inquiry, in which he also confirmed draft plans on exiting the eurozone were drawn up by Government – a claim he previously denied.

Speaking during a detailed meeting on the November 2010 bailout, he said officials were already thinking about troika help after the September 29, 2008, bank guarantee.

Mr Cardiff said days after the guarantee was announced by then taoiseach Brian Cowen, he was asking a colleague to “make a discreet inquiry as to how you get into these things [bailouts] if you need them”.

Mr Cardiff, the department’s banking unit chief before becoming secretary general from 2010 to 2012, said the IMF let it be known support would be available.

However, when the “precautionary” option was raised with then finance minister Brian Lenihan in early 2009, the “firm instruction” was not to pursue.

More than a year later, in November 2010, Ireland was effectively forced into a €67.5bn bailout.

While former ECB president Jean Claude Trichet has said all he did was “simply advise” Ireland that funding would dry up without a bailout, Mr Cardiff said this comment is “the kind of truth where every word was true but the impression was not”.

He told inquiry chair Ciarán Lynch, the guarantee meant a bailout was always likely as bank difficulties were now State difficulties.

Mr Cardiff also confirmed back-room Department of Finance officials drew up secret draft plans if Ireland was “unceremoniously shown” the eurozone door.

Mr Cardiff told Fine Gael TD Eoghan Murphy that Ireland was not the only nation planning behind the scenes.

Citing a conversation with a foreign counterpart, Mr Cardiff said he was asked “could you have whoever is not working on it in your office telephone whoever is not working on it in my office” but that “we couldn’t even hint in public that this was a serious consideration”.

Mr Cardiff also said a 2011 ‘Johnny Logan Working Group’ – named after the singer of What’s Another Year – sought to find an extra year’s funding to lessen the bailout, which Sinn Féin finance spokesperson Pearse Doherty said resulted in cuts on vulnerable people.

He took issue with Mr Lenihan’s October 2008 claim the guarantee was the “cheapest” ever, saying sometimes ministers make comments “without advice”, and repeated the IMF was in favour of allowing Ireland to burn senior bondholders.

He said Mr Lenihan had “one very optimistic day” when he thought this may happen, before it was shot down by the US Treasury and ECB.

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