Letter reveals ECB funding 'threat'

A top-level threat to cut emergency European funding to Ireland days before the humiliating international bailout will shock people, Public Expenditure Minister Brendan Howlin has said.

Letters released today by the European Central Bank (ECB) confirm the Government was warned crisis funds propping up collapsed banks in 2010 would be withdrawn unless they asked for an €85bn rescue package.

October 15, 2010 letter from Trichet to Lenihan Nov 4, 2010 letter from Lenihan to Trichet Nov 19, 2010 letter from Trichet to Lenihan Nov 21, 2010 letter from Lenihan to Trichet

The missive from then-ECB president Jean Claude Trichet to the late former Finance Minister Brian Lenihan also demanded a written commitment to punishing austerity measures, spending cutbacks and an overhaul of the financial industry.

Irish high-street banks were surviving on emergency funding – known as emergency liquidity assistance (ELA) – at the time and if stopped, it could have effectively shut down the property crash-ravaged lenders.

Mr Trichet urged a speedy response to his proposals, which have been interpreted by some as the Frankfurt central bank pushing Ireland into a bailout.

“It is the position of the (ECB) Governing Council that it is only if we receive in writing a commitment from the Irish government vis-a-vis the Eurosystem on the four following points that we can authorise further provisions of ELA (Emergency Liquidity Assistance) to Irish financial institutions,” Mr Trichet wrote.

The four points included Ireland seeking a bailout, agreeing to austerity, reforming banks and guaranteeing to repay emergency funds.

Two days after the letter was sent on November 19 Ireland officially requested a rescue package from the ECB, the International Monetary Fund and the European Commission.

Minister Howlin said the letters – published after a years-long campaign for their release – would “come as a shock to many people”.

Speaking about the ECB’s approach to Ireland, Mr Howlin said the present Government was aware of the “demands and pressures that they put us under at that time”.

Mr Lenihan was battling cancer at the time and later died from his illness.

Tánaiste Joan Burton said the letters are “certainly very poignant in that context”.

The Labour leader said she hoped the publication of the letters would free some people to speak more freely about exactly what happened within Government on the days leading up to the bailout.

A number of Fianna Fáil Government Ministers at the time said they had no knowledge of the imminent arrival of the ECB/IMF/EC Troika into the country.

Finance Minister Michael Noonan said the letters speak for themselves and would be vital to an upcoming banking inquiry.

The parliamentary inquiry into Ireland’s financial collapse is expected to start this year and finish its work by the end of next year.

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