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PATRICK HONOHAN HAS revealed the series of events that led up to him making his now infamous call to Morning Ireland in 2010.
On Thursday 18 November of that year, the Central Bank governor announced on the radio programme that Ireland was in talks with the EU and IMF about a bailout.
His comments contradicted statements made by the government, which was publicly denying this was the case.
During his lengthy appearance at the banking inquiry today, Honohan noted that in earlier in the week there had been a meeting at which many Eurogroup finance ministers “pressed Brian Lenihan to announce that he was going to apply for a loan from the IMF and the European institutions”.
“He refused to do that, he said he didn’t have the authority to do that. They were puzzled because they knew that negotiations were going on, they were wondering what was going on.
“So there was a sense of excitement and concern, alarm I would say, in Frankfurt with the people I talked to informally on the Wednesday night.”
Honohan said members of the governing council, which he refused to name, wanted Ireland to enter a bailout programme, and he agreed.
The outgoing governor recalled telephoning Lenihan, then Finance Minister, after the meeting.
“I told him ‘Look, they want you to announce a programme, you know I think you should.’ And he said, ‘I can’t do that, I’d need a government decision.’
He was very cross, ‘Why are they trying to rush me, what’s this?’ He was very cross, there was no talking to him.
So I went back into the meeting with my tail between my legs and I wondered what was going to happen next. And I started to worry that I wasn’t doing enough. There was a sense of panic – both in the official circles, but especially in the market.
Honohan said he was compelled to act when he saw the lead article in the Financial Times stated that Ireland should prepare for a bank run.
“So I thought maybe I could say on the radio ‘Look, we have loads of money in central banks. We can provide money to these banks. You don’t need to be taking your money out, your money is perfectly safe.’”
Honohan said he asked “the relevant senior people” on a corridor, “Will you contradict me if I say ‘Don’t worry, the ECB will give unlimited money’.”
They said they would as an open-ended guarantee was not an option.
‘I got away with it’
“I spent the night thinking about what I should do and I decided, first of all, that time was of the essence. Once you lose the confidence of the markets, it can take a long time to get it back. So I thought ‘You must act now’.”
Honohan said he carefully selected his words in the interview and came “very, very close” to saying the ECB would provide all the finance, but stopped short of this, saying he’d have to ask them, but didn’t think they’d say no.
“I got away with it, they didn’t contradict me.
Was I trying to contradict the Taoiseach? Was I trying to contradict other ministers who had said that? No … Maybe I wasn’t sufficiently attuned to the political happenings that were going on in Dublin because I’d been in Brussels and Frankfurt.
“When the Taoiseach of the time said ‘We’re not in negotiations, I took that to be the standard thing understood by informed people, ‘Oh, you’re not in negotiations, you’re in pre-negotiations.’”
I knew they wouldn’t be all that happy that I made the announcement, but I didn’t realise they’d be so unhappy.
Honohan said Lenihan or then Taoiseach Brian Cowen were not given prior warning about the phonecall, noting they they would have told him not to do it.
“It would have been a courtesy to inform Kevin Cardiff (then secretary general of the department of finance) or the department of the Taoiseach … which didn’t occur to me in my anxiety.”
Honohan said he was not obliged to inform them beforehand due to the independence of his office.
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Backing politicians into a corner of having to tell the truth, you bet they were unhappy.
Actually this forced a hand, and it just might have been the wrong move.
Good for Germany, not so good for Ireland.
Compare Syrizas negotiation tactics with our reactionary panic at that time.
Forced whose hand?
Central banker refused to play politics, fair play.
The Central Bank had a press release issued before the bailout was agreed on !
it makes it look like they had Fianna fail politicians over a barrel – and the Annsbacher document sits on Richard Bruton’s desk !
Before it was signed you say? My god, why oh why would the CB do such a thing? If only there was an article outlining the president of that CB’s reasons for making the announcement early that we could reference for justification, it might have had something to do with trying to stop a run on the banks for all we know. Alas, we remain in the dark until such an article can be located.
The evidence was given by a Civil servant in the Inquiry yesterday Egg ..
a lot of smoke often leads to a lot of daggers !
@ Hermes:
The evidence (see link below) said that they DRAFTED a press release just before the bank guarantee was agreed in 2008.
There was no mention of a press release concerning the bailout, which happened two years later in 2010.
He’s actually playing politics now. Political rule #1 Cover your ass at the expense of others.
Something strikes me about Honohan, self preservation syndrome to the fore. hunts with the hounds, runs with the fox.
He is just another arrogant professor who thinks more of his fame and notoriety than having any real ability other than appearing in public with his lines prepared is the way I see him !
Honohan has been the first truly independent Central Bank Governor. His predecessors all came from the Department of Finance and so were never truly independent.
I hope his successor is just as independent and doesn’t come from the Civil Service.
@ Hermes: You never have a good word to say about anyone. Patrick Honohan has done the state some service, more than you have I’d hasten to add.
Brian lenihan was bluffing on behalf of the Irish tax payer by insisting we wouldn’t accept a bailout unless we got a good deal. But then been the banker that he is Honohan sold the country down the river by revealing on radio that we would be accepting a bailout. Patrick Honohan probably cost us a couple of billion in reality but the media think he’s a great lad cause he’s a “strait talker” don’t you know. Idiots
The bailout was already done.
Lenihan spent 18 months at the start of the crisis doing nothing but going out.
Cowen went in to a black place and hid there.
Lenihan went around telling the global media that Ireland could not have a bank run because we were an Island.
I don’t think the man was mentally up to the job or aware of the problems. He seemed to be very aware though when it came to creating legislation that allowed bankrupt developers clean out their bank accounts in Anglo, against the advice of his Dept.
He was very aware when he paid all junior bondholders and never informed the cabinet.
Maybe Lenihan was such a good bluffer that he convinced everyone who worked with him or dealt with Ireland when he was Finance Minister that he hadn’t a clue what he was doing.
Saw a real expert on the tv the other night talking about this. He said none of the politicians on the PAC are experts on economics, finance or banking. Therefore they’re not asking the right questions and not doing a good job of extraction valuable information from the guys they’re questioning. I know they’ll say they’re saving millions by not having a tribunal, but this is the other extreme, and if its not done properly, they’ll have just wasted, i dunno how many months sitting in that room asking tom, dick and harry pointless questions, when they could have been doing something more productive for the country. It’ll probably conclude just before the next election and it’ll be all FFs fault.
STFU with this bull , when is someone going to do jail time is all I want to know .
You should go to the Guards with your evidence of laws having been broken.
He might like to explain how there was a “Press release” from the Central Bank issued confirming the Bailout – before the bailout had been agreed by Our elected Government !
The Central bank is badly exposed in a criminal sense on this one !
Lenihan and the Govt. thought that if they kept the electorate in the dark that they could get away with anything.
I think it’s amazing that so many commentators on here know more that professors or others experts in their own fields.
I’d go so far as to say you don’t know enough to know that you know nothing.
Kevin Cardiff did very well out of it, he shafted a guy to get the job.
Honohan was only doing what HE was told. His role is subordinated the that of the chairman of the ECB so he was doing what was prudent in the circumstances of the time not to spook the poor citizens, play along knowing full well the bailout etc would all follow.
He like most was wondering were Cowan and Lenihan really across this?
Did they fully understand it all?
Why else was he up all night ruminating on what to announce to the nation if he didn’t feel the boys being paid to to the job were nit actually up for it ?
He may come out of it looking like a smug banker/professor type but that’s because he knew what was going down as did another Professor Morgan!
You had an army of enthusiastic amateurs lining up to gain say them but if course they were never truly impartial
Did Ahern not mention “suicide” at one stage and he was the guy at the top !
The whole thing is so tragic and would be laughable if not so serious but Honohan and his reputation will be secure unlike Cowen Lenihan et al
No doubt Mary o rourke will be on the airwaves tomorrow trying to protect Brian lenihans legacy
Would there be a bank run, if Greece exits? Only asking, because I don’t know.
have your say