European Central Bank chief Jean-Claude Trichet has dismissed claims by former minister for finance Brian Lenihan that the bank betrayed Ireland immediately before the EU-IMF bailout.
Mr Trichet said the facts showed that the ECB had sided with Ireland in its difficulties and that the bank’s support for the State’s financial system was without parallel.
Mr Lenihan’s claim that the bank bounced Ireland into accepting external aid last year is known to have met with a cold response at the bank’s headquarters in Frankfurt.
Asked yesterday whether the former minister’s assertions tallied with his understanding of what happened in the run-up to the rescue, Mr Trichet issued an unqualified defence of the bank’s policies in Ireland. “I have no particular comment . . . on what has been said by any speaker. I would only say that the level of commitment of the euro system to Ireland has absolutely no precedent,” he said.
At a press conference in Helsinki, Mr Trichet repeated that remark for emphasis. He went on: “So the facts are speaking by themselves. We are, you know, siding with Ireland in the difficult circumstances.”
A high-level euro zone source said Mr Lenihan’s remarks were deemed “unfair” within the ECB, which is supporting Ireland’s banks to the tune of some €150 billion. This was particularly so given pressure from “powerful governments” against the provision of such extraordinary support for banks, the source said.
A further reflection of the bank’s commitment was that its backing for Irish financial institutions “could be seen as going beyond the ECB’s legal mandate”. The source said it was known that Mr Lenihan made his remarks some time before they were reported over the Easter weekend. His comments were therefore perceived as “election rhetoric” so the reaction in Frankfurt is “calm”.
In recent days, other well-placed euro zone sources have characterised the former minister’s comments as an attempt to put a gloss on his own record in office.
Mr Trichet was speaking after the ECB’s governing council held its core interest rate steady at 1.25 per cent. Damping down expectation that the bank might increase rates again next month, he said the bank will monitor inflation risks “very closely”.
The ECB chief has often warned that a rate rise is one month away by saying the bank is exercising “strong vigilance” against inflation, an expression he did not use yesterday.
His remarks on Ireland come weeks after the ECB decided not to proceed with a medium-term liquidity facility for the Irish banking system, a scheme the Government said was necessary to bolster a new round of bank recapitalisations.
In the event, the ECB took steps to offset the impact of any “junk” rating on Ireland’s debt by suspending indefinitely its minimum rating threshold on Irish sovereign debt and on bank debt guaranteed by the State.
Asked whether exceptionally high bond yields on Irish bonds mean debt restructuring or rescheduling was in prospect, Mr Trichet said Ireland’s rescue plan was a credible one.
“In the case of Ireland, we have a plan which has been approved by the international community – the entire world – and by the European , which is being implemented by the Government,” he said.
Mr Trichet also dismissed mounting concern in official circles that the Greek authorities will not be able to tap market financing again next year as foreseen in its bailout, saying debt restructuring was not “on the cards” for Greece.
“The key for credibility, the key for creditworthiness, the key for taking full advantage of the recovery which is ongoing in Europe, is to be credible in fiscal responsibility, especially for those countries that have the most work to do,” he said.
With the anti-bailout True Finns party agitating against Finnish participation in Portugal’s new EU-IMF rescue package, Mr Trichet said the governing council was “calling all countries to be up to their responsibility in the circumstances”.
