Trichet ‘very clear’ he would not be happy if bondholders burned

Former European Central Bank (ECB) president Jean-Claude Trichet made it “very clear” he would not be happy if Ireland attempted to burn bondholders, the banking inquiry heard yesterday.

John Moran, secretary general at the Department of Finance from 2011 to 2014, said Mr Trichet was the only person stopping the Government burning the bondholders in Anglo Irish Bank and Irish Nationwide. Mr Moran said Minister for Finance Michael Noonan had discussions with the ECB until the minute he entered the Dáil in March 2011 to announce a restructuring of the banks.

He told the committee he was not in on the phone call with Mr Trichet, but said the former ECB president had made it “very clear” he would not be happy with burden-sharing.

Mr Moran said: “I can certainly tell you we had a Minister and a Government who were very anxious to take the decision to burden-share with those bonds and the only person who was stopping them was the person on the other end of the phone call.”

Mr Moran was answering questions from Fianna Fáil TD Michael McGrath, who asked whether Mr Trichet had threatened to withdraw funding if Ireland pursued that route.

Mr Moran replied: “He wouldn’t have been happy about burden-sharing. He made that very clear.”

The former secretary general said the Minister’s announcement in the Dáil was delayed because “three or four” speeches were prepared. He said discussions went on until the minute before and the minute after Mr Noonan took to his feet.

Constrained

Mr Moran was asked about his relationship with Irish Bank Resolution Corporation (IBRC) and its chief executive, Mike Aynsley, but said he was constrained from what he could say because a commission of investigation had been established. He said he had a different mission for the bank from Mr Aynsley, and discussions had taken place in that regard.

Mr Moran, who left his role in 2014, said the banking crisis had been portrayed as a TV show, but he insisted the reality was a lot different.

He said: “They might wish for the drama of Ireland’s economic collapse to be couched in terms of irresponsible overpaid bankers, reckless developers, the night of the bank guarantee, and the burning of these faceless bondholders. It makes good TV, as they say.

“A simplistic rhetoric has therefore been entertained that if we had not had a collapse of Lehman Brothers and the Irish banks and had burned the bondholders, we would have had no issues. True, our property-price collapse led to awful widespread destruction of personal wealth and unemployment.

“But the sad reality is that an acute lack of fiscal capacity at governmental level removed flexibility in easing the impact of those problems. The fiscal rectitude we are experiencing since was a necessary result of the terrible and perilous structure of Ireland’s fiscal profit and loss (or, if you like, taxes and spending).”

Mr Moran said the story had been portrayed as simply giving €64 billion to our banks, but he said more than half of that had been paid back to the State. However, he said politicians and civil servants needed to be constantly reminded that debt was being heaped on future generations so that people in 2015 and 2016 could live.

Afraid

The former secretary general criticised the culture in the Department of Finance and said staff were afraid to speak out or to make mistakes.

Mr Moran also said that it was no longer attractive to work in the Civil Service and that his personal life had been intruded on by the media.

He claimed he had been “subjected to inaccurate public criticism by some even then current politicians for stating facts in a neutral but truthful way about repossession statistics in the country”.

Mr Moran said: “Unless the system robustly defends, not attacks, civil servants acting in good faith, is it fair to expect them to be more vocal and point out the alternatives, however unpopular, to the political choices or to protest loudly when perhaps a wrong decision is being contemplated?

“It was surprising, too, to me how little proactive debate about strategic longer-term choices for Ireland was taking place even in private within the corridors of power in ways that involved the full broader leadership team of all of the Government departments.”