The Curious Case of Irish Banks, the Army and a Prime Minister

Irish Prime Minister Enda Kenny

Irish Prime Minister Enda Kenny

Simon Dawson/Bloomberg
  • Kenny said he was warned banks might have needed army guard
  • Opposition parties demand clarification of crisis-era incident

It’s sometime in the recent past. The prime minister gets a briefing from the central bank governor. Ireland is on the edge, he’s told. It’s almost time to scramble the army to protect the banks and their cash machines.

That was the drama depicted by Irish Prime Minister Enda Kenny in Madrid to an audience of European People’s Party members on Thursday, as he sought to explain how close Ireland came to the abyss. It’s a familiar refrain, with Kenny telling the parliament in Dublin this week of the impending disaster he faced.

“The governor of the central bank in Ireland said to me: ‘You’ll have to put the army around the banks and around the ATM machines and introduce capital controls like they had in Cyprus’,” Kenny said in remarks widely reported in the Irish media.

Kenny’s remarks reflect a campaign strategy ahead of national elections in Ireland, due within months, that’s a familiar narrative for prime ministers this year: that incumbent governments rescued the economy. In Dublin, though, the comments have caused some confusion.

Kenny didn’t specify when Governor Patrick Honohan made the comments he remembers, though Cyprus shut its banks to staunch withdrawals in March 2013 when Ireland was headed toward the end of its bailout. Opposition politicians ask why Kenny didn’t mention the episode in his evidence to the country’s inquiry into the banking crisis.

Kenny “must substantiate claims of plans to deploy the army to prevent a bank run,” said Michael McGrath, a spokesman for Fianna Fail, the party that led Ireland into an international bailout before being unseated in 2011.

Unless the prime minister, known in Ireland as the Taoiseach, “immediately confirms the detail of what specific events he is referring to people will be left with no alternative but to assume that this is yet another self-aggrandizing story,” said McGrath.

Grave Situation

“A conversation around the grave situation in which our banks found themselves and the necessity to make security plans accordingly took place between the Taoiseach and the governor, ” government spokesman Feargal Purcell said in response to questions. “It is hard to credit Fianna Fail’s ongoing denial of the appalling state in which they left the country and the pain they visited on the population."

While the central bank declined to comment, Kenny’s finance minister said on Friday in Dublin that security considerations came into play during the crisis.

“There were discussions about what might be done,” said Finance Minister Michael Noonan in remarks broadcast by Newstalk FM. “But then things passed on, the discussions never turned into an actual security plan.”

Security Concerns

It wouldn’t be the only time security concerns emerged during the crisis that enveloped the euro region. At one point during the summer, the Greek central bank boosted security at its vaults because of growing concern that some ministers might order a raid on reserves of banknotes, a person familiar with the matter said.

In Ireland, Kenny is known for his folksy manner. After his 2011 election, he promised to keep voters informed, saying “Paddy likes to know what the story is.” He may face more questions on this particular one.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE