Unite to stop next crisis in banking - Controlling the world of finance

TWO sobering but illustrative events played out simultaneously yesterday. Each showed how powerless democratically elected, supposedly sovereign, governments can be in the face of unflinching international creditors or too-big-to-fail banks tottering towards collapse asking — demanding if you prefer — that they be rescued with public funds.

Former secretary general of the Department of Finance Kevin Cardiff gave evidence to the banking inquiry and confirmed that Ireland was “pushed quite hard” into its bailout programme at the end of 2010. He said that the European Central Bank was unambiguous and forceful. It wanted, despite its chief executive Jean-Claude Trichet’s assertions to the contrary, Ireland to sign on the dotted line and that if it did not do so there would be “consequences”.

Mr Cardiff said proposals to burn bondholders received a “negative reaction” from the ECB and others — presumably he is referring to Timothy Geithner, President Obama’s then Secretary of the Treasury — so that avenue leading towards something like moral hazard for the bondholders was closed off to our Government. In relation to burning Anglo Irish Bank bondholders he said there was a clear “direction” from the ECB not to do this.