EU-IMF Programme Documents & Secret Side Letter on the Banks - Update: Lenihan's Letter of November 9th Released

[disability student]

Blog from Constain worth reading:http://trueeconomics.blogspot.ie/

We can only speculate as to Minister Noonan's motives for promising, at last, to publish this letter. My suspicion is two-fold:

1.
Nothing penetrates the skulls of Irish establishment other than bad publicity in international press. Frankly put, years of criticising Governments policies have taught me several lessons. One of them is that an article in the Irish Times causes an 'outrage' and 'indignant' denials. An article in the likes of Forbes or Wall Street Journal or FT causes real 'concerns'. Ireland's elites are incapable of reassessing their adopted positions (on policy or transparency or anything else) unless their silence can damage their standing with the MNCs and within international community.

2.
We might be getting a pre-management of what is likely to be a fizzling-out of the Government efforts to deliver on the 'seismic' June 29 EU summit commitment 'to re-examine' Irish banks bailouts.

The above are speculative arguments, solely to raise some questions, but the change in Minister Noonan's rhetoric is indeed rather dramatic.

Italy received a similar letter and it was leaked to the press back in August 2011 (see here). The world didn't end and Italian economy did not collapse. ATMs still function. The ECB sent a similar (in nature) letter to Spain, and that letter remains undisclosed to the public. Minister Noonan could, in my view, make the letter fully public at any moment in time by simply ordering it to be published. All that stands between Minister Noonan's stated intention of publishing the letter and the actual publication of the letter is... err... Minister Noonan's will.

As an aid to securing Ireland's future, it is relevant only in so far as it raises real questions relating to the competence of our permanent 'elite' - the Government advisers and the senior civil servants.


The alleged threat contained in the ECB letter is that the ECB were to turn off the liquidity taps to Irish banking system because imposing haircuts on banks bondholders would have risked a full contagion from Irish banks to the Euro system or its financial system at large. Suppose this is so. Surely, turning off the liquidity tap in such a case would have risked a full-blown and immediate collapse of the entire Irish banking system (as opposed to the partial insolvency triggered in some banks by bondholders actions) - the very same system that is, allegedly, so vital to the European banking system that even a handful of disgruntled bondholders relating to Irish banks could trigger a run on the European banking.


This is (a) highly alogical, and (b) unlikely to have passed the ECB council vote.

Worse than that: such a threat would have forced Ireland to exit the Euro system and monetize the banking system with own currency - an event that would have threatened much more than just the stability of the Euro area banking system, but the existence of the Euro as a currency.

Thus, if the threat contained in the letter is that of the liquidity starvation, such a threat could not have been credible when it was made. Which implies that either the letter contains some other threat, or that the Government at the time was simply out of its depth in dealing with the crisis.Setting aside, for now, the possibility of the former, the latter, if true raises another set of questions: Where were the Government advisers (especially the ones who are today still in the position of considerable power and authority)? Where were the senior civil servants (pretty much all of whom are still in the positions of considerable power and authority)?

You see, incompetence of the Government ends with the Government replacement by the voters. Politicians, in the end are accountable.

Incompetence of the permanent elite (senior civil servants and advisers in charge of steering the Minister response) continues as long as they remain in the positions of authority and then, beyond, into their handsomely rewarded retirement. The former aspect of the letter is stuff for historians, the latter is for us.

[DCon]

Noonan says, "well FF did not release it either"

Meanwhile, Minister Noonan said that Fianna Fáil had plenty of opportunities to publish a letter from former ECB president Jean-Claude Trichet when it was in Government.

He said that the Government has decided that all documents will be provided when an investigation into the banking collapse is carried out.

Mr Doherty called for the immediate release of a letter from the ECB to former finance minister Brian Lenihan, which reportedly left Ireland with no choice but to accept a bailout.

http://www.rte.ie/news/2012/0827/min...ax-detail.html

[Dr. FIVE]

http://www.businesspost.ie/#!story/H...2-e2ff39948605

However there is confusion, too , about timing. The FOI data released to us and other media said that there was a letter sent from Trichet to Brian Lenihan on November 4th, another on November 18th and another on the 19th. Minister Noonan's comments reference the one of the 19th. However at this stage the die was pretty much cast - as Central Bank governor Patrick Honohan had given his famous Morning Ireland interview on the 18th. By the 21st, Lenihan had formally requested a bailout. It is possible that the letter of the 19th was designed to push the government finally over the line to a full bailout, I suppose. Remember there had been some talk that we would receive cash just for the banks, not the exchequer.

To complicate matters further, interviews given by Lenihan referred to correspondence around November 12th from Trichet as being crucial in the decision to go for a bailout. However the FOI data make no reference to any letter between the 4th and the 18th.

Perhaps there is no importance to this and Lenihan was, in fact, referring to the letter sent on November 4th. By this state Deauville was over, the markets were in chaos and the debate about Ireland was well and truly on. Or was there some other communication on the 12th, perhaps by phone or email which was not strictly "a letter?"

[disability student]

Bet that verbal thug politician have no intention of releasing that letter whatsoever. Why was he bringing it up even though ECB was/is against it?

Was he playing for more time or create a distraction to fill in column inches of any paper? Remind you that decision would have to be made this October re debt write off or what or deferred debts?

Tell me which is more important .. September 2008 or November 2010? I would regard September 2008 was critically important than November'10.

[MPB]

The simple fact is that many of us have been saying for 2 years that the actions of the ECB/EU in forcing Ireland to take on the debt of private Banks, by threatenining to refuse liquidity to the Irish banking system was an illegal act.

Of course until the equally slow to cop,but far more important commentators like Karl Whelan and Colm Mc Carthy started to point it out, the Irish Govt was quite content to pay those private bank debts with our taxes, wages, jobs and services.

FG and Noonan have been every bit as culpable in trying to protect higher civil service and politicians pay and pensions, at our expense.

This letter has existed for 2 years and the only reason it was not published was to preserve the staus of senior civil servants, Bankers, consultants, law firms, auditors, regulators, central bankers and politicians.

Until we are rid of all, this country will remain in the mire, financially and morally.

[PaddyJoe]

Looks like Stephen Collins has had an official briefing on the letters between Trichet and Lenihan. About time a trusted journalist set the record straight

Three critical letters were dispatched by Mr Trichet to Mr Lenihan in the run-up to the bailout.

They were sent on October 15th, November 4th and November 19th, 2010. It also appears likely that an email or fax reinforcing the message was sent to Mr Lenihan on November 12th, prompting his conversation with Mr Trichet.

The Department of Finance made reference to the letters in response to a freedom of information request by The Irish Times.

The October 15th letter spelled out the ECB’s worries about the rapid increase over the previous few weeks in the funding it was providing to the Irish banking system. Mr Trichet pointed to the extraordinarily large provision of liquidity by the euro system to the Irish banks.

The letter pointed out that this liquidity was subject to rules about the provision of adequate collateral. It said that Ireland’s access to such funds could be limited or even terminated completely.

Mr Trichet also pointed out that there were worries among the members of the governing council of the ECB about the appropriateness of its exposure to the Irish banks.

In particular, the letter referred to the provision of emergency liquidity assistance by the Irish Central Bank and said the governing council would assess whether there was a need to impose specific conditions to protect the integrity of monetary policy.

Mr Trichet emphasised that the large provision by the ECB and the Irish Central Bank to Anglo Irish Bank could not be taken for granted as a long-term solution.

On November 4th, Mr Trichet wrote another letter to Mr Lenihan. He repeated many of the points made in the earlier letter about the massive exposure of the ECB to Irish bank debt.

He focused again on the concerns of the governing council of the ECB about its exposure to the Irish banking system for such enormous sums, and he repeated many of the points made in the earlier letter.

This time, however, he pointedly said that the ECB was monitoring the Irish government’s commitment to its four-year plan, still in preparation, and said that continuing ECB support was contingent on the plan being implemented.

On the same day, Mr Lenihan announced a targeted adjustment of €15 billion over four years, with €6 billion of that coming in 2011. The full detail of the four-year plan was to follow at the end of the month.

The decisive conversation with Mr Trichet followed on November 12th, and it is possible that this arose following a fax or email reinforcing the points made on November 4th.

In an interview with Irish Times economics editor Dan O’Brien, conducted after Fianna Fáil had lost power, Mr Lenihan was adamant that a communication from Mr Trichet had arrived on November 12th.

The final letter from Mr Trichet urging Mr Lenihan to accept the bailout was sent on November 19th. However, by that stage, the governor of the Irish Central Bank, Patrick Honohan, had publicly said a bailout was necessary.

The Trichet letter of November 19th urged Mr Lenihan and his government colleagues to accept the necessity for a bailout and agree to a programme with the troika.

http://www.irishtimes.com/newspaper/...ce=twitterfeed

[PaddyJoe]

Collins analysis:

ON THE morning of November 12th, 2010, the late Brian Lenihan rang the president of the European Central Bank (ECB) Jean-Claude Trichet to seek clarity about the contents of a letter that hinted strongly that funding for the Irish banking system could be at risk if Ireland did not enter a bailout programme.

In conversation, Trichet was far more blunt than he had been in a number of written communications. He told Lenihan quite simply that the ECB could no longer provide unconditional support for the Irish banks unless the government in Dublin accepted the need for a bailout.

At that stage the ECB had pumped €130 billion into the Irish banks and underwritten another €34 billion in emergency liquidity assistance from the Irish Central Bank to the country’s dead banks, Anglo Irish and Irish Nationwide.

Trichet told Lenihan the governing council of the ECB was becoming fearful that the whole European banking system was being put at risk by Ireland. Continued support would have to be conditional on Ireland entering a bailout programme.

It took another week for Lenihan and his colleagues to accept the reality that there was no alternative to a bailout, but the die was cast on November 12th.

http://www.irishtimes.com/newspaper/...mpaign=digests

[MPB]

Collins analysis:

http://www.irishtimes.com/newspaper/...mpaign=digests

The die was cast on Sept 29th 2008.

Here we are in Sept 2012 and we still don,t know what happened on the days leading up to, or the night of the Banking guarantee.

If Trichet was so concerned with saving the European Banking system and felt that pushing the Irish Sovereign into a bailout, how come the interest rate for this so called bailout was upwards of 6%.

It was not a bailout, it was reparations. It was a punishment.

The ECB is rotten to the core. It is stuffed full of corrupt carpetbaggers, doing the work of the criminals that permeate the worlds banking system.

[Dr. FIVE]

http://namawinelake.wordpress.com/20...november-2010/

[Dr. FIVE]

Good exchanges between, Karl W, NWL and Gavin Sheridan this afternoon

https://twitter.com/gavinsblog

[PaddyJoe]

Good exchanges between, Karl W, NWL and Gavin Sheridan this afternoon

https://twitter.com/gavinsblog

It looks like the usual Dept. sources briefed Collins. But did they get their story straight? Gavin Sheridan isn't convinced..

Gavin Sheridan ‏@gavinsblog
@WhelanKarl if Stephen's article is true then the ECB lied in an access to information request about a Nov 4 communication

[Dr. FIVE]

Goes to show where arse kissing and cheerleading will get you in journalism.
Safe pair of hands also, Collins wouldn't tell us anything he decided we shouldn't know

[PaddyJoe]

Goes to show where arse kissing and cheerleading will get you in journalism.
Safe pair of hands also, Collins wouldn't tell us anything he decided we shouldn't know

Just another example of the way that the IT and RTE get briefed when the government need to spin a story.
Seamless transition from the old regime.

[Dr. FIVE]

true true

[C. Flower]

http://namawinelake.wordpress.com/20...november-2010/

A soft leak, to take pressure for release off, and to take the freshness out of any future release of the letters, to create a possibly false narrative ?

Hard to see why the letters as reported by the IT should not have been released earlier.