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'Take a bailout or we'll cut emergency funding' - ECB to Ireland in 2010

The infamous letter from Jean-Claude Trichet has finally been released.

Image: Eamonn Farrell/Photocall Ireland

Updated 3.25pm 

THE EUROPEAN CENTRAL Bank told Ireland to take a bailout or face losing emergency funding, according to a four-year-old letter published for the first time today.

The 2010 letter from then-European Central Bank president Jean-Claude Trichet to then-Finance Minister Brian Lenihan is carried in today’s Irish Times.

Sent on 19 November 2010, it says that the ECB would only continue to fund Ireland if they received “in writing a commitment” that Ireland would apply for a bailout.

The ECB has this afternoon published four previously unreleased letters between the ECB and Lenihan, including the 19 November 2010 one, following a meeting of its governing council.

In a statement the ECB claims that the letters and documentation show that it was  not the Trichet letter that “pushed Ireland into the programme” but rather it was the scale of the domestic financial crisis.

“The documentation also shows that in the run-up to the application for support and throughout the Irish programme, the ECB has continued to support the Irish banking system and the Irish economy in an unprecedented manner,” the ECB said.

Key points

  • ECB letter threatened Irish funding unless a bailout was accepted, demands a “swift response”. 
  • Current ECB president says that the ECB did not force Ireland into a bailout
  • Noonan says letter is “vital” for banking inquiry
  • Howlin says it will “come as a shock” to many
  • Taoiseach says “die was cast” in 1997
  • Burton says letter reminds her of “personal friend” Brian Lenihan
  • FF’s Michael McGrath says Ireland was bullied into a bailout.

The letter from Trichet to Lenihan came just a day after Irish Central Bank governor Patrick Honohan had gone on Morning Ireland to say Ireland had no choice but to apply for a bailout.

It finishes by pressing Lenihan for a “swift response” before markets opened the following week.

The assessment of the Governing Council on the appropriateness of the Eurosystem’s exposure to Irish banks will essentially depend on rapid and decisive progress in the formulation of a concrete action plan in the areas which have been mentioned in this letter and in its subsequent implementation.

Speaking at a press conference earlier, current ECB president Mario Draghi, insisted: “The decision to ask for a programme was the government’s decision, it was not the ECB forcing the government to do this.”

“I think the four letters show exactly 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.”

Screen Shot 2014-11-06 at 15.25.26 Mario Draghi earlier today Source: ECB

Freedom of Information

Up to now, requests to release the letter under the Freedom of Information act – including one made by TheJournal.ie – had been rebuffed by both the Department of Finance and the ECB.

On his way into a meeting of the Economic Management Council this morning, the Finance Minister Michael Noonan told reporters that the letter would be “vital” for the forthcoming banking inquiry.

Public Expenditure and Reform Minister Brendan Howlin said that the letter “will come as a shock to many people”.

Speaking today at Government Buildings, the Taoiseach Enda Kenny said that by the time the letter had been sent in November 2010, the country was already off track.

“I think that the root of our problem began at the 1997 election. At that stage, the country was lean, competitive and had a good cost base. But all was let go to the wind by the assumption that the country could be run on taxes from property.

“By the time the letter was sent, the government of the day and the central bank had been on Irish radio saying the IMF were in Ireland.

The die had been cast.”

Kenny said that the letter was a reminder of how far the country has come.

Tánaiste Joan Burton said that the letter was a reminder of the deceased Lenihan, whom she called “a personal friend”. She added: ”It brings it back in a very poignant way.”

Leinster House reaction

At Leaders’ Questions, in the Dáil the independent TD Catherine Murphy claimed that the release of the Trichet letter was designed to ”knock Irish Water off the front pages of the newspapers”.

Burton said she hoped the release of the Trichet letters will “free up” some witnesses at the forthcoming banking inquiry “to speak more freely”.

Speaking to reporters at Leinster House, Fianna Fáil’s finance spokesperson Michael McGrath said the correspondence was a “clear, direct threat” from the ECB.

“What we had here was a powerful European institution in my view exceeding its mandate and essentially bullying a sovereign government into accepting bailout,” he said.

He said that the government should used the now-released correspondence “to strengthen our hand” in negotiations on seeking retrospective recapitalisation of Irish banks.

- additional reporting by Hugh O’Connell

First published 7.20am

Read: Here’s when we’ll find out if that infamous Trichet-Lenihan letter will be released

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