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 that the 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 morning he 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 today from the ECB 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)
UPDATE: 22nd January 2012. RTE is reporting that Minister for Transport and Tourism Leo Varadkar has said in respect of the €1.25bn bond that falls due on Wednesday that the Troika has said “we don’t want you to default on these payments, it is your decision ultimately but a bomb will go off; and the bomb will go off in Dublin and not in Frankfurt.”
NAMA Wine Lake 
Does the Irish Department of Finance not have copies of all correspondence? As they say in Yes Prime Minister, “if it’s not minuted, it didn’t happen”
The DoF has a clear case of stockholm syndrome.
Although the value of burning bank bondholders is mostly gone, it may be of some value to create an awareness in Europe. i.e. to create headlines and panic before climbing down and paying. I see no harm in making it widely known that the Irish are being shafted. It may help if/when the sovereign is forced to restructure.
Perhaps the DoF has the letter. But who should have a cc is the central bank. And they are subject to the FOI. Or at the very least they can be given a right good rattle to see what drops. They are an Agent of the State where the DoF is agent of government. It’s one of the nice things about being a Sovereign Republic, government isn’t sovereign. The only pity is that that button isn’t pushed a bit more.
DoF will have a copy but I imagine it will be covered by international relations exceptions under the FoI legislation (as is IMF correspondence).
The Central Bank are *not* subject to FOI. DoF previously refused to release the letter on several grounds.
Declarations of war have a tenancy to do that yes.
I want to see that letter. People managing the DoF and the estate of the late Minister Lenihan need to get their act together and leaking information, in the interests of the state and the nation.
If economic war has been declared or threatened against us, then Ireland and the Irish public needs to be prepared for what is coming.
Does any letter even exist? Will nobody in DoF do the right thing and just copy the bloody thing. Yes, theyd get fired probably, or never promoted more like….
There is no question that the letter exists. The ECB’s refusal letter to Mr. Sheridan confirms both the existence of the letter and also its explosive contents. This letter is Watergate Tapes-esque material.
We can cross our fingers for just one patriot in the DoF, but I think those days are gone. The people running this state are more concerned with Euros in ATMs than in Irish Independence.
Ah the poor ole ATM’s . Dont hit me with the ATM in me arms…bleurgh
Regretably, the patriot we were looking for should have the letter, read out the contents and burnt it publicly in front of the GPO one hour after it was received.
@Gavin understand you have appealed,are there any precedents and if so what has been the success rate with FOI and ECB.Great work as always.
And nobody thought to “ask” Kevin Cardiff about it ? Before he goes into the belly of the beast, so to speak ?
Actually, one recollects a media column by Michael Clifford which seemed to have scent of the threat : that if we dared step out of line, all the bank support would be pulled, and redeployed to protect the EU banks that would have been most at risk of the loss caused by an Irish banking collapse etc. It hardly makes any difference to the ECB where they put this money at risk – but this would ensure maximum leverage. The same threat was subsequently, and without much disguise, applied to Greece. (Which is also a backhanded implication that Anglo could have been let go, without the major risk to EU – but easier to let Paddy pay for it, if possible)
that was always a bottle of smoke. Doing that would have caused even the most rabidly pro euro govt to HAVE to unilaterally withdraw. And that would have caused a worse crisis on the remaining countries. It would , as I have stated many and many the time been the economics of Gen Westmoreland “in order to save the currency it was necessary to destroy it”. So, smoke, bottle thereof.
As I have also said, we send nice well educated boys from castleknock out to negotiate with the political heirs of Richelieu and Bismark and wonder WTF happened…. Find some nasty IrishItalian distressed debt junkyard dogs, appoint them tho the senate and then put them in charge of negotiations. With Phil Laak to back them up….
Hmm… I wouldn’t write it off completely Brian…
From a comment on this blog back in June:
As well as Michael Clifford, Colm McCarthy has mentioned that the ECB threatened Ireland and appears to consider it a real possibility:
We have no hope of finding what the letter said. We are now ruled by dictat from the Franco/German alliance. I believe that in order to get our second bailout (the spin started today) we will be forced to concede to the French demand on our corporate interest rate. The softening up of public perception has just started.
The spin about our “export led growth” was today shown for what it is, when the truth surfaced and our export growth was shown to be less than one third than that of the rest of the EU. That didn’t stop the Independent proclaiming in headlines that “Irish exports boom by €8 billion” – (It’s the way you tell ’em that counts).
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it was not a ‘negotiation’ never was never will be.
“Negotiation is a dialogue between two or more people or parties, intended to reach an understanding, resolve point of difference, or gain advantage in outcome of dialogue, to produce an agreement upon courses of action, to bargain for individual or collective advantage, to craft outcomes to satisfy various interests of two people/parties involved in negotiation process. Negotiation is a process where each party involved in negotiating tries to gain an advantage for themselves by the end of the process. Negotiation is intended to aim at compromise.”
http://en.wikipedia.org/wiki/Negotiation
@brianmlucey, You’ve got it in one. It’s like sending Bray Wanderers to play Manchester United.
John Ignatius is showing them how it should be done in another arena – as he says “you fight like a rat in a corner”.
Our team versus the ECB and our Franco/German masters are not even “gifted amateurs”.
I recall what were almost threatening bullying comments from Barroso around this time, made quite openly, while Ireland of course was saying “ah sure we’ll be grand”
Since when was a little brat brother ever bailed out without some harsh words or a kick in the ass.
So there’s a letter….so
This letter needs to be leaked.
If our budget can be leaked and discussed in the German Parliament…
Call me naive, the European Union and Eurozone is supposed to be based upon mutual co-operation and the concept of “working together” as outlined in the original architecture of what was known as the EEC/Common Market.
I’m beginning to appreciate how the Greeks feel – except this country and her citizens are actually trying to comply with what is being imposed upon us.
I buy a round of drinks I expect to at least be on nodding terms with those who I’m buy a round for.
It’s not too much for us to be allowed see the letter telling us why we have to pay people who we don’t legally owe money to, is it?
He may have been “crest fallen” but only because he finally had to face the full folly of not only giving the blanket guarantee but also of being made to honor it.
@Robert, the €1,250m bond at Anglo that is being repaid on 25th Jan 2012 is unguaranteed, the guarantee having expired. For good measure the bond is not secured against any specific Anglo assets.
Fair point. However the irish guarantee put in train certain dynamics europe wide that forced the covering of other creditors to an equivalent degree as ireland had done. Remember the in rush of deposits from uk and europe endangering those banks immediately following the guarantee.
Yes. But don’t rock the boat. Everyone keep waving and pointing their finger at brussels.
And when the IFSC founders?
Bailout, courtesy of the taxpayer.
@ROC : yes the Irish bank guarantee discommoded all other distressed banks in the EZ and the UK when FF/Greens decided to indemnify all the liabilities in the country’s guaranteed banks in September 2008.
Irish citizens are now seeing the full impact of that reckless guarantee being inflicted upon this country’s people.
It is shameful that Fianna Fail, Fine Gael and Labour all voted to support this unjust and ethically wrong bank guarantee.
@ gerhard
I think that Labour actually voted against the bank guarantee in September 2008. They may well have been the only party to vote against it as I can rrecollect that even the shinners voted for it.
[…] ECB refuses to hand over November 2010 threat letter sent to Brian Lenihan « NAMA Wine Lake […]
Just a thought, why not try the EU Ombudsman, he has a pretty good record in getting documents revealed.
http://www.ombudsman.europa.eu/home.faces
[…] have more here and here. I would add that it pays to remember the ECB plays for keeps, and is not above outright extortion to get what it […]
[…] (niente debiti, ma obbligata da un ricatto a socializzare le perdite delle banche; la BCE incontra difficoltà crescenti a coprire la vicenda), dalla manovra di Monti, e dal martirio greco (l’IMF si sta ribellando). […]
Astonishing stuff! Yet we have 7 Fine Gael backbenchers, outspoken on their ill-informed, speculatively derisory comments on Croke Park, intent on harming home relations. Easy for them to attack fellow citizens as they are intellectually incapable of understanding any level of complexity, only latch on to populus agenda to increase their public profile. Would be interesting to hear them debate bond holder repayments in any attempt to save much needed exchequer funds for domestic priorities….
[…] […]
[…] claim that it is not in the public interest to release it. I have a copy. Good article here on it. Sign in or Register Now to […]