Germany, the European Commission and ECB threatened to force Ireland out of the euro
Philippe Legrain – who was personally headhunted by Commission president Manuel Barroso, below, in 2011 to advise him on economic strategy – gave a damning condemnation of what he said amounted to “bullying” by the EU.
“It was outrageous of Germany, the European Commission and above all the ECB to threaten to force Ireland out of the euro if it did not follow through with that foolish guarantee, lumbering Irish people, who have already suffered enough from collapsing house prices and a sinking economy, with a €64bn bill to bail out bust banks, €14,000 for every man, woman and child,” said Mr Legrain, who left his job at the Commission earlier this year to release a book condemning the EU’s handling of the financial crisis.
“Ireland’s partners abused the fact that it desperately wanted to be part of the euro”.
“I understand why the Irish government did what it did (agreed to implement a bank guarantee) but they could have stood up for themselves . . . the European Central Bank would have blinked,” the former London School of Economics academic added.
Promises
Ireland’s only chance to mitigate some of this damage is by getting some of its legacy bank debts written off, he said. The Department of Finance has not made any progress on this issue so far, despite repeated promises of a deal by Finance Minister Michael Noonan.
“The State must use any leverage it can to negotiate a write-off,” he said. “Its best weapon is any proposed changes to EU treaties – because Ireland constitutionally has the right to hold referendums on these changes and can use this as a bargaining tool.” Any decision that Germany really wants which requires a unanimous decision from all member states could be used as leverage, he said.
“Ireland needs to play hardball now. It’s in a much better position, borrowing at record-low borrowing rates”.
Mr Legrain said the eurozone has been built along German lines. “The Commission has failed in that it has been much too keen to align with Germany,” he said.
Fundamental flaws in the European banking model still have not been resolved seven years after the crisis emerged, he added, and the much-hyped stress tests due to be carried out on banks later this year are unlikely to help.
The equity/debt ratios these stress tests look at are far too low, he said, adding that the ECB, which will soon take over the direct regulation of big banks like Bank of Ireland, AIB and Permanent TSB, is a deeply flawed organisation.
“Throughout the crisis, the ECB has furthered the interests of French and German banks and proved itself to be unimpartial.”
Legislation designed to wind down banks and prevent a “too big to fail” situation is also flawed, he said, because national governments still have the right to veto the forced closure of banks in their jurisdiction.
source :Irish Independent http://www.independent.ie/business/irish/irish-were-bullied-and-treated-outrageously-during-crisis-legrain-30250226.html
