At his third banking inquiry meeting yesterday, he outlined the growing pressure to enter a bailout in the seven months before the November 18, 2010, radio interview. Mr Honohan said the call to Morning Ireland was in the country’s interest.
He said the day before €900m in deposits left Irish banks, and there were concerns of a run on the institutions.
During an ECB governing council meeting in Frankfurt, Mr Honohan felt growing ECB pressure for then finance minister Brian Lenihan to announce a bailout.
However, a “cross” Mr Lenihan was insistent it was too early, and told Mr Honohan this in a call at “9pm or 10pm” on November 17, 2010.
After meeting unnamed “relevant senior [ECB] people” in a corridor, the Central Bank governor decided to make his Morning Ireland revelation.
“They couldn’t understand [the delay]. It was the ECB saying ‘come on, you know you have to do this’,” Mr Honohan told Fine Gael senator Michael D’Arcy.
“I went back with my tail between my legs and wondered what was going to happen next. I thought maybe I could say on the radio ‘look, your money is perfectly safe’,” he said.
Despite government anger, Mr Honohan insisted he did not “undermine” Mr Lenihan and rejected Mr D’Arcy’s claim he took part in a “financial coup d’etat”.
The outgoing Central Bank governor also told the inquiry that in the months before the interview, the IMF and ECB were growing fearful of Ireland’s situation. He said Ireland was initially seen as “ahead of the curve” due to the blanket guarantee, but two years later views hardened — partly due to the scale of Nama loans.
During an April 10, 2010 Greek bailout conversation, Mr Honohan said it should be backed as “we might be next”, adding he had been told “while Greece is Europe’s Bear Stearns, Ireland could be Europe’s Lehman Brothers”. In May, he got a call “out of the blue” from IMF official Ashoka Mody who suggested a “precautionary line of credit”, which Mr Lenihan rejected.
The situation led to “pressure” to enter a bailout from September 2010 and ex-ECB president Jean-Claude Trichet’s “advice” letter.
Mr Honohan said the “necessary” bailout’s terms were “unsatisfactory”.
While he said Anglo and Irish Nationwide should not have been guaranteed, it “only” cost “€2 to 10bn”. He said senior bondholders should have been burned, but confirmed this would have stopped a bailout.