It was Professor Karl Whelan of UCD who recently catapulted back into the national debate the subject of that infamous letter sent by former president of the ECB, Jean-Claude Trichet to our then-Minister for Finance Brian Lenihan in November 2010. This followed freedom of information-type requests for correspondence between the two, by Gavin Sheridan to the ECB itself late last year and by the Independent newspaper to our own Department of Finance – both journalistic endeavours were unfruitful, with both the ECB and Department of Finance opting to closely guard the contents of the correspondence which occurred at a critical juncture in Ireland’s history on the eve of requesting an international bailout.
Today, the Irish Times publishes two feature articles on letters it claims “to have seen” – here and here. It has been established that there are definitely three letters from Jean-Claude to Brian on 15th October 2010, on 4th November 2010 and 19th November 2010. There remains a mystery over the existence of a letter on 11th or 12th November 2010 – Minister Lenihan alluded to it, but present efforts to locate it have failed. There may also have been emails, faxes and phone calls, the contents of which are not at this point reported. It also needs to be carefully noted that the refusal in writing by the ECB to provide copies of correspondence to Irish journalist Gavin Sheridan, makes no reference to letters on 15th October and 4th November – these are hardly reckless omissions by the ECB.
The three letters which have “been seen” by the Irish Times are indeed threatening but there is no mention whatsoever in today’s reporting of bondholders. It has commonly been believed that the ECB threatened to withhold liquidity funding of Irish banks if Minister Lenihan did not agree to protect bondholders – there is no allusion to this in today’s reports.
The letters are threatening in that they tied the continuation of the ECB continuing to provide liquidity funding, to Ireland seeking a bailout programme. In other words “apply for a bailout with close scrutiny of your finances and actions, or we will withhold cash and your banking system and economy will collapse” This is outrageous.
The ECB has hitherto refused to make public its correspondence during the crucial period of this State’s history. Minister for Finance, Michael Noonan has recently said he would overturn his own Department’s decision in refusing to hand over the letters, though in the limited context of a parliamentary inquiry.
It is now high time for these three acknowledged letters to be published. It is also high time for the details of phone calls, emails, faxes and any other communication between the ECB and the Department of Finance to be made public. Despite the rhetoric, this State is still teetering on the verge of default, to a large extent as a result of the cost of the bank bailout. And within the bank bailout, the cost of repaying certain classes of bondholders may, contrary to claims from some quarters, become the difference between debt sustainability and default.
UPDATE: 1st September, 2012. Journalist Gavin Sheridan has said on Twitter that it “appears the ECB lied” to him when it restricted its response to letters of 18th and 19th November 2010. And remember that the Irish Times reporting today shows that the letter of 19th November 2010 was the least controversial of the three letters seen by that newspaper.