Former European Central Bank chief Jean-Claude Trichet has flatly denied claims that he ordered Ireland’s finance minister to save the country’s banks at all costs three days before a controversial blanket guarantee.
Questioned by a parliamentary inquiry into Ireland’s banking crisis, Mr Trichet said the first he learned about the €440 billion bailout of six lenders – two of which later collapsed – was through the media.
“There was no call from me to Brian (Lenihan),” he said.
“It would not have been in line with what we were doing at the time.”
In a television interview before his death, Mr Lenihan said he missed a call on his mobile phone from Mr Trichet at the height of the crisis on September 27 2008, as he was at a party event at a racecourse in Co Kilkenny.
When he caught up with the message the following day, he said Mr Trichet had warned him “that you must save your banks at all costs”.
Addressing the inquiry, Mr Trichet said he could not say whether the banking guarantee introduced three days later, which has cost Irish taxpayers €40 billion, led directly to the country’s IMF/ECB bailout.
At the time Ireland was facing a total collapse of its banking system, which was one of the most vulnerable in the world, he said.
It was also threatened with an economic depression akin to the 1930s, he added.
“I think he (Mr Lenihan) did what he thought was the best thing in absolutely dramatic circumstances,” he told the hearing.
Mr Trichet, who was in charge of the ECB during the banking crisis, originally refused to give evidence to the inquiry, claiming the central bank was not accountable to national parliaments.
But in a compromise, he agreed to take questions from TDs and senators sitting on the inquiry after a lecture at the Institute of International and European Affairs at Royal Hospital Kilmainham.
The questions were given to him in advance.
``I did not provide particular advice for the situation in 2008,'' he said.
“There was dramatic advice across the board for all nations, all governments.
“We were not kept abreast of any development in Dublin by the Irish authorities.
“As regards the guarantee, we learned (about) the guarantee through the media. That was the situation.”
Mr Trichet added: “I don’t blame anybody, you have to understand that Ireland was one of the ships in a terribly agitated sea or ocean where everybody could sink, and decisions were taken at a global level.
“My main responsibility was to see what we could do at global level to avoid drama.”
Mr Trichet said the banking guarantee came as a thunderbolt to many countries, including Ireland’s near closest neighbours.
The ECB was on the record as being critical of some aspects of the move at the time.
Dublin did not ask for any advice on the measure and no advice was given, he said.
Mr Trichet also denied that he threatened to withdraw funding to Ireland at the time if it refused to repay bondholders, or investors, in the banks.
The ECB’s view at the time was that this option was “extremely risky” for Ireland, he told the hearing.
“The ECB simply gave advice on this issue,” he added. “It doesn’t have the authority to issue instructions to governments or ministers.”
Mr Trichet said there was a consensus at European and global level after the banking guarantee that “burden sharing” with senior bondholders was too risky to consider at such a time.
The repercussions would far outweigh the potential gains, he said.