THE letters released by the ECB yesterday tell us nothing we did not already know. There have been many leaks since 2010 alluding to the pressure applied by the ECB on the Irish government forcing the government to apply to the IMF for a bailout. The tone and manner of threat was utterly unacceptable, but not surprising given the dysfunctional nature of the relationship that exists between the ECB and eurozone governments. It is a relationship veiled in secrecy and mired by the dominant political interests of certain member states.
In reality, this bailout application was inevitable in any case, because the collapse of Ireland’s banks, the ill-advised bank guarantee of 2008, the implosion of the property sector, and the enormous gap between government income and expenditure by the end of 2010 all meant that the Irish State was effectively bankrupt and would require a bailout. The effect of the ECB threat was to bring forward that inevitable fateful date when the application was made.
The publication of the letters does not, as some might like to now believe, absolve successive Fianna Fáil governments of blame. They allowed, indeed encouraged, a toxic link to develop between politics, developers, and the banks, which ultimately destroyed this country and left us in a position of bankruptcy in 2010 which cannot be denied, irrespective of the ECB threats.
The publication of the ECB letters very usefully forces us now, as a member state of the eurozone, along with other members, to put the spotlight firmly on the culture of secrecy and the appalling absence of accountability that exists within the ECB.
Until now, the ECB has never published minutes of board meetings, nor has it divulged the voting records of its members to the public at large. The logic behind this was that directors must act in the interest of the eurozone as a whole and not be concerned or influenced by the public and media pressures of their home country.
This logic is outmoded and redundant. We live in an age of increasing transparency, where an educated public expects to know how and why decisions of major importance to them and their families are made. These decisions must be legitimate and transparent.
There is now an ECB commitment to publish minutes five to six weeks after meetings occur, but still no plan to issue accounts or indeed to publish voting records for its directors.
This refusal to open up the ECB to public scrutiny is also redundant because we know that while the ECB is supposedly above any political interference by member states, the reality is that the large member states, and in particular Germany, wield enormous power behind closed doors. I am a fan of Germany and in particular their prudent approach to fiscal management, but I do not believe it is right or fair that one country can wield so much influence behind closed doors.
The absence of a clearly defined structure for elected governments and the European Parliament to bring greater democratic accountability to the ECB is a matter of huge concern.
The charade of the ECB operating independently from governments must come to an end and if that requires EU treaty change, so be it. Ireland should advocate for it. The people have a right to know what backroom deals are being done, and what outside pressures that are being imposed by the most powerful unelected entity in this continent.
The Dáil recently adopted a new bill to allow the European Stability Mechanism directly capitalise eurozone banks. I supported this legislation. Sadly, however, all of these laws won’t be worth the paper they are written on so long as the ECB remains unaccountable to elected governments, but in practice operates a secretive negotiation and leverage process over countries large and small.
Small countries have no power over the ECB, and if their banks go bust, as we learnt at great cost, it will be the sovereign, ie the taxpayer, that takes the hit. In a larger country, if banks are facing the abyss, the ECB will step in to help them out with very little conditionality. In the case of small countries, they are just pushed around.
This is the real politik of the ECB’s power and influence, and unless the treaties deal with this reality, small countries will continue to suffer.
I believe it is in Europe’s and this country’s interest that we create a European structure to bail out financial institutions which have a realistic chance of survival. I equally believe that in a single currency system, risks should be shared and mutualised, irrespective of size or relative economic power of that country. Integration and co-operation are crucial.
I fear, however, that in the absence of binding structures to define the relationship between the ECB and EU member states and the other EU institutions during such crises scenarios, the little country will again be the loser in such a process. It is difficult for small countries to have faith in the ECB while it continues to be shrouded in secrecy.
In the meantime, it is arguable that the Government has a strong case against the ECB for exceeding its mandate by imposing fiscal costs on the State which was above and beyond its authority. If the Government decides to pursue this matter in the European Court of Justice it would not merely be vindicating the rights of Irish citizens, it would be standing up for the small states throughout the eurozone.