Banking Inquiry: ‘I didn’t breach trust amid bailout uncertainty’
He said a letter from European Central Bank president Jean-Claude Trichet in November 2010 – which warned of withdrawing funding for the banks if Ireland did not enter a programme – was “a surprise”.
Ireland wanted to get its budget under control, he said, and there were slow signs of improvement. Mr Cowen said he couldn’t understand why the ECB sent the letter when the Irish government was in talks with European authorities.
At the time, it was clear that Ireland would need up to €30bn in capital funding – on top of funding its bank debt – to get the economy under control, he admitted.
He said the first time he became aware of the need for a bailout was in September 2010, when there had been talks with the ECB.
This was despite the fact that Central Bank governor Patrick Honohan had allegedly said in April that Ireland would need a bailout next after Greece and that in May the bank suggested to the Department of Finance that a “precautionary programme” might be needed.
Mr Cowen said it became apparent during negotiations on the bailout that the ECB was opposed to burning bondholders.
He said there had been “no calculation to mislead” people when the Government denied the possibility of entering a programme, even though when the International Monetary Fund had arrived to Dublin
Discussions were underway, the former Taoiseach said, and it was a “miscalculation” the impact their presence here had on the country.
The Fianna Fáil-led Government had been trying to get a “full picture”, before formally applying for a bailout. “There was a miscommunication that happened,” he said, saying he was responsible for that as head of Cabinet.
By the time of the formal application for a bailout on November 21 that year, Ireland was in a difficult budgetary situation, he said.
While the issue of burden sharing was not discussed, he said it was known the IMF – after consulting with the G8 – were against this.
Mr Cowen said a phonecall from governor Honohan to RTÉ informing the nation that Ireland was going into a bailout put the Government on the back foot.
He also criticised ‘private briefings’ given to the media by unknown sources about Ireland’s finances when the Government was trying to negotiate its bailout.
Mr Cowen disagreed with a suggestion that the setting up of the National Asset Management Agency had contributed to Ireland going into a bailout.
Earlier, Mr Cowen defended a decision to keep the National Treasury Management Agency “outside the room” on the night of the bank guarantee, saying their position was known by the Government. The NTMA thought it was better to nationalise Anglo Irish Bank, the inquiry heard, than include it in the guarantee.
Mr Cowen said the structure of the bank guarantee had had “some effect” on a decision to enter the bailout programme. He rejected a previous claim made in the Dáil by former Labour leader Eamon Gilmore that he had engaged in “economic treason” and that he wanted this wiped from the record: “There is no ground for that.”
Closing his evidence, Mr Cowen said the progress made by Ireland would not have happened “without the sacrifices of the public”. His only motivation had been to serve his country to the best of his ability, he said. He said he had never compromised his political integrity or breached the public trust and that it had been his privilege to serve.
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