Ireland was "pushed quite hard" into its bailout programme at the end of 2010, according to evidence given to the Oireachtas Banking Inquiry by Kevin Cardiff, a former secretary general of the department of finance.
“At the moment we entered (the bailout) we were pushed quite hard,” he said. “In some cases it was direct, in other cases it was indirectly.”
Mr Cardiff said the European Central Bank was direct in wanting Ireland to accept a bailout programme and that there would be “consequences” otherwise.
Mr Cardiff accepted that “it was quite unlikely that Ireland could refinance in 2011” as the cost of our sovereign debt had become “unsustainable” at that point.
He was “grateful” that an “alternative set of lenders” was willing to provide financial assistance to Ireland in this period.
On the issue of burning senior bondholders, Mr Cardiff said this was not always the Government’s position but by November 2010 it did want them to share the burden of resuing the financial sector.
He said this option was explored by the IMF but received a “negative reaction” from the ECB and others and it was no longer an option. In relation to burning Anglo Irish Bank bondholders at a later date, Mr Cardiff said there was a clear “direction” from the ECB not to do this.
He said suggestions in previous evidence to the inquiry by former ECB president Jean-Claude Trichet that the bank “simply” gave advice did not reflect the situation at the time.
“We shouldn’t hide from that,” he said. Mr Cardiff was the day-to-day co-ordinator of Ireland’s bailout negotiations with the EU and IMF.
In relation to the bank guarantee, Mr Cardiff said liquidating Anglo on that night in September 29th 2008 was “too dangerous to contemplate”.
He said there was a real fear on the night that there could be a run on Anglo in the coming days while Irish Life & Permanent was “expected to run out of cash” within a matter of days.
Mr Cardiff said that waiting a few more days before making a decision would have been a “gamble” and there was no certainty that the ECB would have continued to extend emergency liquidity.
On the night, Mr Cardiff suggested that Anglo be nationalised with a guarantee of sorts for the other banks but the Government decided on a broad guarantee. “I don’t know that I was right,” he said. “Certainly, there had to be some guarantee that night.”
He said AIB and Bank of Ireland did know that a broad guarantee had been agreed. That they did provide a draft of how the guarantee might be structured, the pricing around it and a list of subsidiaries that would be included.
They wanted Anglo either nationalised or “dealt with in some way”
Mr Cardiff’s submission to the inquiry covered 380 pages. His opening remarks lasted for about 30 minutes.
In response to a question from Senator Susan O’Keeffe, Mr Cardiff said he started writing it on his “Christmas holidays”.
