Share/Bookmark

Sunday, 27 February 2011

Who Needs Enemies When You Have ECB?

The ECB has no love for Ireland and is seeking to punish us. That's why we should tell it where to go...

When the new government settles into their new offices in the next few weeks, many many problems await them. None more so than Ireland's by now fractious relationship with Europe and in particular the European Central Bank (ECB).

In truth, Ireland's relationship with the ECB has become so dysfunctional that it now verges on abusive, and Ireland is the one being beaten, and beaten hard.


Jean Claude Trichet on his €344,000 plus a year salary and his cronies have no love for Ireland at the minute and despite all the talk of it lending us €150bn to keep our banks afloat, any sensible person would know that is out of its own self interest and not out of any great affection for our small little island.

The ECB's role in Ireland's financial crisis was by anybody's standard dubious at best, and criminal at worst.

During the boom years of 2004 to 2008, the ECB did nothing to stop the flood of cheap money into Ireland from German and French banks, did nothing to ensure our regulator was doing his job and failed to spot the mounting crisis in Irish banks throughout 2008.

Remember in the days before the colossal calamity that was the bank guarantee in September 2008 that it was none other than Trichet himself who rang rookie Finance Minister Brian Lenihan ordering him not to let any of the Irish banks fail -- a diktat which was to prove extraordinarily costly for the Irish taxpayer.

It was a move driven by a desire to protect the interest of the main banks in mainland Europe, at the expense of Ireland's best interests.

With a new government almost upon us, I sought last week to find out exactly what the sentiment toward Ireland is in Frankfurt. "Mention Ireland to a senior ECB figure, and he's likely to spit fire at you at the minute, such is the animosity toward us," was how a senior government source put it to me.

A few weeks back, senior ECB official Lorenzo Bini Smaghi gave a most revealing interview as to the lack of compassion for Ireland's plight within the bank.

"When there are people who say that the Irish taxpayers are suffering from the problems created by the banking system, I would remind that for many years the Irish taxpayers benefited from that system. You [the Irish people] should not complain if now you have to increase taxes as a result of the choice of economic model the Irish people made," he barked. This was in essence an Irish decision, he concluded.

While there is no doubting the criminality that went on in Irish banks, particularly at Anglo and Irish Nationwide, Smaghi's selective criticism is as hypocritical as it is self-serving.

He failed to mention anything about his bank's ineptitude during the boom in keeping an eye on what was happening, or to limit the flow of cheap money which led to our building bonanza.

But to fully appreciate where we stand, one must only look at the ECB's role in Ireland's seeking of external assistance last November.

Only days after the bailout deal was signed, former Justice Minister Dermot Ahern revealed how officials from the ECB had tried to force Ireland into seeking a bailout before it had even been discussed at Cabinet.

Mr Ahern said "quite incredible pressure" was being applied to the country ahead of the IMF/EU meetings and the same thing was also happening to Portugal. "There were people from outside this country who were trying to bounce us in, as a sovereign state, into making an application -- throwing in the towel -- before we had even considered it as a government," he said. Asked about who was pressuring Ireland, he said they were "quite obviously" people from the ECB.

We also know that the ECB, fed up with lending so much money to broken Irish banks, decided to pull the plug and began briefing against Ireland to European media in the week before the request was made. That cynical move sent our borrowing rate to record highs, forcing us out of the market and into the arms of the ECB/IMF deal.

We also now know that it was the ECB, not the EU or the IMF, that kiboshed any notion of burning the bondholders, for fear of contagion. Yet again, the Irish had to take another one on the chin for Europe. Worse still, it was the ECB who sought to profit so much off the back of the money it was lending to Ireland. It has to be said, with friends like the ECB, who needs enemies?

Furthermore, the intention of the ECB to increase interest rates between now and the end of 2012 to aid Germany will stymie fragile Irish growth even further. Enough is enough. We must stop looking at the ECB as something that is helping Ireland, but rather as something that has choked us, stifled us and is kicking us over and over again while we are down.

Looking ahead, when it comes to Ireland, the ECB has gotten itself into a tricky situation.

Trichet and his goons are in a real bind as to what to do. On the one hand, it is extremely unhappy about how much emergency funding it has had to pump into the Irish banks and wants its money back. On the other hand, like the IMF and the EU Commission, it realises that it is in everyone's interest for Ireland to get its house in order and crippling it with debt isn't working.

If Ireland is to get going again, Enda Kenny's new government must put an end to the systematic bullying by the ECB, which Lenihan, Cowen et al seemed unable or unwilling to do. We have €150bn of their money and we have a strong hand with which to go into any renegotiation.

The time has come for Ireland to stop being the whipping boy or test case for Europe. The time has come for the Irish government to put Ireland's national interest ahead of trying to be good Europeans. Only time will tell if Kenny and his Finance Minister in waiting, Michael Noonan, are up to the job. We'll wait and see.


Article by Daniel McConnell - Sunday Independent

No comments: