ECB took the side of the rogue banks - Banking inquiry evidence

FINANCE Minister Michael Noonan and a former IMF deputy director Ajai Chopra yesterday confirmed what has been widely believed for many years — that “advice” offered by the European Central Bank to Ireland as our banks stumbled towards collapse was a thinly-disguised, take-it-or-leave-it ultimatum.

Their chilling but unsurprising evidence finally destroys what remained of former European Bank president Jean Claude Trichet’s credibility. Tragically, it also undermines the oft-trumpeted but nebulous idea of European solidarity. It must bring into question too the overweening power of the ECB and the licence it has assumed by treating democratically elected parliaments with such bully-boy tactics.

Basically, a small, vulnerable country — albeit one that made many mistakes — was hung out to dry on the insistence of the ECB — and, lest we forget former US Treasury Secretary Timothy Geithner.

The kind strangers back-stopping our banking system may have worn a velvet glove but the ECB’s determination to protect banks and investors at a great and disproportionate expense to citizens of this country revealed the uncompromising steel and that unelected institution’s determination to protect a golden circle.

The final bill, according to Mr Noonan yesterday, will be in the region of €35bn — in addition to the years of stymied social development and cuts in vital public services, issues likely to have a profound and destabilising political legacy.

Mr Noonan and Mr Chopra confirmed to the Oireachtas banking inquiry that M Trichet was unambiguous and clearly threatening when Ireland sought ECB support at one of the darkest moments in this Republic’s relatively short history. Mr Noonan confirmed that the ECB blocked’s attempts to impose losses on senior bondholders in Anglo Irish Bank in 2011 but that it is important to differentiate between bondholders in Anglo and Irish Nationwide and those in the pillar banks.

Essentially, we had a choice between ECB support for a society tottering towards economic collapse or imposing losses on those who paved the road towards that implosion by supporting our out-of-control casino institutions. Effectively, an unsustainable price was put on doing the right thing — imposing losses on imprudent investors rather than hardship on innocent bystanders. The principle of moral hazard was jettisoned and private losses socialised. International banks were given the ultimate get-out-of-jail card.

Mr Noonan’s and Mr Chopra’s evidence and the crumbs of information so arrogantly thrown by M Trichet — and how credible can that evidence be? — are incompatible but there will be not consequences for anyone except the citizens of this small country who have been left to foot the bill.

The episode is a chilling indication of limits of power a small, dependent democracy can hope to exercise that the ECB and M Trichet are at least as untouchable as any rogue banker in this sorry saga. And that is the very core issue for the banking inquiry and most democracies around the world today: the accountability vacuum and the mismatch between democracies and transnational corporate forces, commercial or statutory, that have assumed so much power in our world.

One hundred years ago this month over 100,000 young men, mostly Europeans but many overseas troops too, lost their lives in the Battle of Loos. That war, the one to end all wars, brought, largely at least, an end to European imperialism and colonialism — or so the history books tell us. In the light of yesterday’s confirmations of the ECB’s majisterial autocracy and so many other examples so obvious today it seems national imperialism has been replaced by corporate imperialism. That so many international corporations exploit tax opportunities so very adroitly suggests they regard our democracies as the Romanovs once regarded the Duma — as tiresome folderols that at the end of the end are irrelevant, that decocracy, or at least democracy as it has evolved over recent decades, is a cacophony that can be ignored once it gets too loud. That evolution and the deep, bone-gnawing distrust and cynicism this generates has given us Donald Trump — despite his inflammatory anti-migrant obscenities the son of Mary Anne MacLeod, an emigrant from the Hebridean Island of Lewis — and at the other end of the scale British Labour party leadership contender Trotskyist Jeremy Corbyn. It has given us Syrizia and Podermos and, arguably, Isis.

In Ireland it has given us the prospect of terrible political instability and all the while establishment politicians persist lemming-like with business as usual ignoring the great and strengthening hunger for a fairer more equitable world. The real tragedy is that their failure may become our failure too.

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