The long summer of 2010
Brian Lenihan, 8 December 2010 –
People should not be surprised that there’s a huge erosion of trust in the Irish banking system when we’ve an endless debate on whether we should be defaulting on the payment of our obligations,” he said. “A small country like Ireland cannot default without the support of a central bank because you have to have the bank loaded with cash while you’re engaged in such a default and it’s not feasible for us to do this.” “We really need to face up to this because we’ve allowed public discussion to become dominated by it and it has done huge damage to the country,” he added.
ECB board member Lorenzo Bini Smaghi –
Whereas Cowen and his ministers had responded swiftly during 2009 as fiscal conditions worsened, Bini Smaghi says there was no comparable action to reassure markets when the heat came on last year. Ireland was listing from the summer, its position worsening all the time as investors took fright.
“Markets waited and waited and since they saw no policy reactions they started to lose confidence in the course of the summer. Remember there was a downgrade – in August – but there was no policy reaction, no announcement that a tough budget was in preparation and no announcement of the measures. The loss of confidence also affected the banking system and this created a spiral which led to the crisis and in the end the request for financial assistance.”
August was the month that the estimated cost for Anglo was bumped up another couple of billion, but there was no one around from the government to explain what had happened. Among the questions coming from this blockbuster interview is: who decided to keep Anglo out of the June EU bank stress tests?
When an Italian is wondering why a country was asleep in August, you know you’ve got a problem.