Cowen claims bank guarantee was 'least worst option'; FF spending led to quicker recovery

The former Taoiseach Brian Cowen has defended the decision to go with the bank guarantee in September 2008 saying he had to pick the "least worst option".

Mr Cowen is now into his second day before the banking inquiry, this time dealing with his period as Taoiseach from 2008 to 2011.

He has also outlined details of the Troika bailout and admitted he underestimated the impact of the "IMF coming to town" element for talks, but again insists the Government made the best decisions it could at the time.

On the guarantee, he outlined that he did not favour nationalising Anglo on the night as it would mean taking on the liabilities forever, rather than for the two years as the eventual guarantee intended.

Mr Cowen said the message was clear that they had to act that night.

He said: "It has to be emphasised that no decision was risk-free, there was no one good or right option that would guarantee a solution to the problem.

"It was about trying to pick the least worst option and to make sure that as we only had one go at trying to stabilise the situation, that it would have every prospect of doing so.

"Trying to forecast where all of this would go next was extremely difficult to predict."

Cowen also claimed Ireland bounced back from its devastating financial collapse quicker because of his spending spree while in office.

On his second day before the Oireachtas inquiry into the crisis, the ex-taoiseach insisted he takes responsibility for his role as leader of the country in the downturn.

But he insisted his policies while in power were “plausible”.

His Fianna Fáil-led government decisions were stress-tested against threats, but there was a “clear misjudgment of the risks and potential impacts”, he told the Oireachtas Banking Inquiry.

Mr Cowen also said his approach was “broadly shared” even by political opponents.

At the time the public was questioning if spending on improved services and other investments was happening fast enough, he told the hearing.

Mr Cowen said if his government had spent less during the boom, the country would not have suffered as severely in the dramatic nosedive from the late 2000s.

But he said that would have also meant fewer jobs and lower growth before the crash, which “would have in turn reduced our ability to come out of recession as quickly as we have”.

“One way or the other the impact of the financial crisis has made the serious adjustment in the public finances which could not have been avoided in any event,” he said.

After four years as finance minister, Mr Cowen was taoiseach from May 2008 to March 2011.

He was responsible for the infamous blanket guarantee for six banks at the height of the financial turmoil in September 2008 – which will cost Irish people €64bn.

He resigned as taoiseach and Fianna Fáil leader in 2011.

The same year his party suffered a bruising wipe-out in the general election by voters intent on punishing them for the crash.

Since then, Mr Cowen has taken more than €725,000 in pension payouts from the public purse.