ECB Tried to Force Ireland Into Bailout, Minister Says
Irish Justice Minister Dermot Ahern
Daniel Acker/Bloomberg
Irish Justice Minister Dermot Ahern.
Irish Justice Minister Dermot Ahern. Photographer: Daniel Acker/Bloomberg
Nov. 30 (Bloomberg) -- William White, chairman of the Paris-based Organization for Economic Cooperation and Development, discusses the European sovereign-debt crisis. White speaks from Basel, Switzerland, with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
European Central Bank officials tried to force Ireland to seek a bailout earlier this month and European officials are now trying to do the same to Portugal, Irish Justice Minister Dermot Ahern said.
“Clearly 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 told Irish state broadcaster RTE in an interview today. “And if you notice, they are doing the same with Portugal now.”
Asked about who was pressuring Ireland, he said, “quite obviously people from within the ECB.”
The Frankfurt-based central bank’s drive to withdraw emergency stimulus from the euro-region’s 16-nation economy is being complicated by a worsening fiscal crisis across the bloc’s periphery. While Ireland was given an 85 billion-euro ($111 billion) rescue package on Nov. 28, that didn’t stop a bond market selloff that yesterday sparked the biggest slide in Spanish government debt since the euro’s 1999 debut.
ECB President Jean-Claude Trichet said the bank can’t afford to set its monetary policy to help individual countries. Asked whether the ECB pushed Ireland into accepting a bailout, he told lawmakers in Brussels today that “we couldn’t adjust our policy to take into account the situation of Ireland.”
ECB Recommendation
The cost of insuring Portugal against default rose 12 basis points to a record 552 today, according to CMA prices. Portugal and Germany last week denied a report in the Financial Times Deutschland that Portugal was facing pressure to ask for aid.
ECB officials, who say they are politically independent, told Ireland on a Nov. 12 conference call that it should seek outside help to rescue its banks and contain a debt crisis, according to a person briefed on the discussion.
Speculation of a bailout mounted in the following days, even as the Irish government denied talks were under way. Ahern said in an interview aired on Nov. 14 that bailout speculation was “fiction.” That evening, the Finance Ministry said it was in talks.
European Union officials “were leaking in the papers that Sunday, quite incredible pressure on this country,” Ahern said today, adding that he won’t stand in the next general election for personal reasons.
An ECB spokesman declined to comment on his remarks.
Bond Purchases
Ireland’s crisis has forced the ECB to buy government bonds and pump money into its banking system. Irish domestic lenders increased their reliance on ECB funding by 3.3 percent in October and the central bank today purchased more Irish bonds, according to two people familiar with the transaction.
The bailout has sparked a wave of domestic criticism accusing Prime Minister Brian Cowen of giving up the country’s sovereignty for punitive terms. More than 50,000 people took to the streets of Dublin on Nov. 27, a day before the government agreed on an average interest rate of 5.8 percent for the loans from the EU and the International Monetary Fund.
“The government was cleaned out in the negotiations,” said Michael Noonan, finance spokesman for Fine Gael, the largest opposition party. “The interest rate of 5.8 percent is far too high and verges on the unaffordable.”
To contact the reporter on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net
To contact the editor responsible for this story: John Fraher at jfraher@bloomberg.net
Rate These Stories
Rate this Page