The story of Ireland’s bailout in November 2010 has been partly told in dribs and drabs. Governor of the Central Bank of Ireland, Patrick Honohan said thatthe Minister for Finance in November 2010, the late Brian Lenihan was “crestfallen” when he learned from the ECB that Ireland couldn’t default even on the unguaranteed debts of the banks. The Governor went on to say that Minister Lenihan was “offered no room” for negotiation on the matter. And in April 2011, Dan O’Brien in a BBC Radio 4 programme referred to a letter sent by the former ECB president, Jean-Claude Trichet on Friday 19th November to Minister Lenihan which set out the ECB position, and which implicitly made demands on Ireland in respect of repaying bondholders as a quid pro quo for the ingoing provision of liquidity to Irish banks – remember to this day, the ECB provides €150bn-odd to Irish banks in loans secured by assets in the banks; the ECB does the same with banks in other countries.
But this letter of 19th November, 2010 aroused interest.
Gavin Sheridan at thestory.ie sent a formal request to the ECB to hand over copies of “any or all communications from the ECB addressed to the Irish Finance Minister (or his direct office) in the month November 2010” This morninghe received a response which stated that there were in fact two letters sent by the ECB to Brian Lenihan in November 2010 – the first is seemingly uncontentious and doesn’t refer at all to the imminent bailout. But the second letter dated 19th November 2010 is withheld in the strongest language; it is, according to the ECB, “a strictly confidential communication between the ECB President and Irish Minister of Finance and concerns measures addressing the extraordinarily severe and difficult situation of the Irish financial sector and their repercussions on the integrity of the euro area monetary policy and the stability of the Irish financial sector”, the letter goes on to claim that “disclosure of its content beyond what is described above would undermine the protection of the public interest as regards the monetary policy of the Union (second indent of Article 4(1)(a) of ECB Decision on public access) and as regards the stability of the financial system in a Member State (seventh indent of Article 4(1)(a) of ECB Decision on public access)”
The letter seeks to justify its refusal to disclose the letter by claiming “the ECB must be in a position to convey pertinent and candid messages to European and national authorities in the manner judged to be the most effective to serve the public interest as regards the fulfilment of its mandate. If required and in the best interest of the public also effective informal and confidential communication must be possible and should not be undermined by the prospect of publicity. In this case the confidential communication was aimed at discussing measures conducive to protecting the effectiveness and integrity of the ECB’s monetary policy and fostering an environment that ultimately contributes to restoring confidence among investors in the overall solvency and sustainability of the Irish financial sector and markets which, in turn, is of overriding importance for the smooth conduct of monetary policy”
In 16 days time, Irelandwill hand over €1,250m to bondholders in Anglo Irish Bank (or IBRC as it is now known after merging with the Irish Nationwide Building Society). This is equal to the amount of new taxes in 2012 that were set out in Budget 2012. So on one day, we will pay over all our new taxes to unsecured, unguaranteed bondholders – “speculative investors” as Minister for Finance, Michael Noonan called them in the USA last June – and the reason that Ireland will take this course of action is likely to be contained in that letter of 19th November 2010 which the ECB refuses to publish.
So why can’t the Irish nation be told about any threat made against its ministers or sovereignty? After all we are now 14 months away from 19th November 2010. Surely the sensitivity of any market information that might have pertained so long ago, has now faded. Although Gavin Sheridan intends to appeal the decision, presumably the Department of Finance still has the letter…
UPDATE: 9th January, 2012. Artists impression of ECB threat letter. Unfortunately the ECB is not releasing the original.
(Graphic above produced by Japlandic.com, with other examples of artwork available here)_________-
Related:
Ireland could need second bailout – top economist
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