Mario Draghi: Irish banking crisis was home made, don't blame the ECB
By Ann Cahill, European Correspondent
The banking crisis that bankrupted the Irish economy was entirely home made and made worse by Irish actions, the president of the ECB Mario Draghi has insisted.
The ECB President was answering questions from three Irish MEPS about the bank’s role in the bailout.
He agreed that the ECB advised against burning bondholders, but said that ultimately this was up to the Irish authorities, and that the rapid recovery of the economy proved the action was right.
Mr Draghi was answering questions from Irish members of the European Parliament about the ECB’s demand to refund the unsecured and non-guaranteed creditors of two private insolvent banks, Irish Nationwide and Anglo Irish Bank, and the threat to cut the emergency cash for Irish banks.
He insisted that the decision, ultimately taken by the Government, to not burn the bondholders had proven to be correct and pointed out it involved €4bn, a relatively small sum compared to the €43bn that private investors had already lost.
Mr Draghi said that in fact the ECB was the firefighter and the crisis reflected misguided policies.
He said: "Do not blame the damage on the fire brigade."
However, Sinn Féin MEP Matt Carthy said that the ECB “was one of the arsonists”.
Mr Draghi, who was not ECB president when the decisions were taken in 2012, reminded the MEPs that the Government decided to guarantee the banks without telling any of its eurozone partners.
As a result of taking on such a burden the markets felt funding the Irish Government was too big a risk, making the crisis a sovereign one.
The ECB continuing to give huge amounts of money to what were effectively insolvent Irish banks was based on advice and decisions of the Irish Central Bank, he told Fine Gael MEP Brian Hayes who asked why the ECB allowed the Irish banks to have such huge sums of emergency liquidity assistance.
Mr Draghi did not react to questions from independent MEP Marian Harkin whether the ECB favoured the ESM - the fund to help troubled eurozone states - taking over the costs of the promissory notes.
He also told her that the four conditions that need to be met to allow the ESM bailout banks in future make it “fairly unlikely to be used at a time of crisis”, although they “might conceive” of such situations.
