Mario Draghi insists ECB did not force Ireland into a bailout in 2010

ECB chief Mario Draghi yesterday insisted that the bank did not force Ireland into a bailout in 2010, as he called into question whether it would appear before the imminent Oireachtas inquiry into the crash.

Insisting that the then government took the ultimate decision to seek a bailout on its own, Mr Draghi said the record suggests that the Irish rescue programme, as cast, worked.

He was speaking at a press conference in Frankfurt after the bank's governing council released an exchange of four letters written in the run-up to the rescue in 2010 by then ECB chief Jean-Claude Trichet and the late Brian Lenihan, then finance minister.

Although Mr Trichet is shown in a letter on November 19th, 2010, to have threatened the withdrawal of emergency support for Ireland’s bank if there was no bailout, Mr Draghi did not directly tackle the question of whether the bank had pointed a gun at the government.

"The very short answer would be just read the four letters and they would give you the whole story. The decision to ask for a programme was the Government's decision. It was not the ECB forcing [it] to do this," he told reporters. Asked who should represent the ECB at the forthcoming Oireachtas inquiry into the banking crash, Mr Draghi said the ECB had not discussed the matter. He made the case, however, that the ECB was accountable to the European Parliament and not strictly to national parliaments.

Trichet welcome

In Brussels meanwhile, Minister for Finance

Michael Noonan

said he would welcome attendance at the inquiry by Mr Trichet or a representative.

On whether the Government should be more vocal in seeking ECB representation at the inquiry, Mr Noonan said there was a wider context to the letters released yesterday.

“It’s up to the parliamentary inquiry now to examine these letters in the context of everything else that was happening and draw whatever conclusions1 they see fit. Of course the decision of the then Irish authorities to issue a blanket bank guarantee on everything is relevant too.”

Mr Noonan declined to offer an opinion as to whether the ECB had stepped outside its remit. “My view is that there’s a banking inquiry now, and it’s a matter for the banking enquiry to examine this documentation. And I don’t particularly want to give personal views that might interfere with deliberations of the banking inquiry.”

He was speaking after Mr Draghi said the ECB’s “normal counterparty” was the European Parliament. “Never forget that the ECB is accountable to the European Parliament, not necessarily to the national parliaments.”

As the ECB defended its refusal to accept the imposition of losses on senior Irish bank bondholders in 2010 and again in 2011, Mr Draghi said he believed the Irish bailout was a success. "Subsequent events, the extraordinary performance of Ireland – next year Ireland will be the fastest-growing economy in Europe, in the euro area certainly – seem to say that after all that decision wasn't that stupid."

The correspondence – comprising two letters from Mr Trichet to Mr Lenihan and the minister’s response in each case – centres on the deterioration in Ireland’s situation in the weeks leading to the rescue deal.

“I think the four letters actually show the sort of dialogue that took place between the Government and the then president of the ECB, Jean-Claude Trichet, so for me there is very little to add to that,” Mr Draghi said.

Emergency aid

Mr Draghi, who was a member of the ECB governing council in 2010, was asked whether it was appropriate for Mr Trichet to threaten the withdrawal of emergency aid for Ireland’s banks at that time. He was also asked whether this was an empty threat, given the ECB’s acute concerns at that time over the threat to stability in the euro zone.

“I’ve said several times – also for other countries – it’s a very big mistake to look at past events with today’s eyes,” he said.

“You should go back and consider what was the situation at that time and ask yourself if at that time that – I wouldn’t say it was a decision by Mr Trichet – it was a dialogue between the Government and a decision between the Government and the ECB and a decision by the Government – whether at that time, with that sort of information you had at that time, that decision was justified or not.”