Bruton defends call for EU banks to share debt burden

EUROPEAN INSTITUTIONS should share some of the responsibility for Ireland’s banking problems, according to IFSC Ireland chairman and former taoiseach John Bruton.

Speaking at a Chartered Accountants Ireland breakfast briefing in Dublin yesterday, Mr Bruton reiterated his assessment that while the main responsibility for Ireland’s plight rests with Irish institutions, the European Central Bank (ECB) and other institutions were part of the picture.

“I hope EU decision-makers will also see that the Irish banking problem has been influenced by the requirement of free movement of capital within Europe since 1990 and the deep interdependence that has created, with all its good and bad aspects.”

He addressed criticisms made by ECB director Lorenzo Bini Smaghi of a speech made by Mr Bruton at the London School of Economics earlier this month, in which he suggested that the ECB could have played a greater role in averting Ireland’s financial crisis.

Mr Bruton said a reading of the statute of the European System of Central Banks showed Dr Bini Smaghi’s claims that the ECB’s powers were confined to monetary policy, and did not extend to prudential supervision of risks in the banking system, were wrong.

Citing articles of the statute, Mr Bruton argued the ECB could have issued instructions to the Central Bank in respect of banking supervision and to euro zone banks which were lending imprudently to Irish banks in a way that fed the property bubble.

Mr Bruton referred to media reports which suggested when Anglo Irish Bank was on the brink of collapse the ECB told the Irish authorities it did not want any bank to fail.

“If the ECB did say this to the Irish authorities, it can hardly argue now that the sole responsibility for what followed rests with the Irish taxpayer,” he said.