Sunday

10th Dec 2023

EU 'bullied' Ireland into bailout, former Barroso aide says

  • Legrain was headhunted by Commission president Barroso in 2011 to advise him on economic strategy (Photo: Lisbon Council)

The EU's institutions 'bullied' Ireland into a bailout, a senior former adviser to the European Commission's president said on Wednesday (7 May).

In an interview with Irish network RTE, Phillipe Legrain accused the Commission and the Frankfurt-based European Central Bank (ECB) of having sided with France and Germany in insisting that Irish taxpayers were left solely responsible for the €64 billion debt burden held by its banks, a move he described as "unjust and unbearable".

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • The EU 'bullied' Ireland into 'unjust and unbearable' bank debt burden, said Phillipe Legrain, a former economic adviser to Jose Barroso. (Photo: Lisbon Council)

"It was a mistake by the previous government to guarantee all Irish bank debts but it was outrageous to effectively threaten to force Ireland out of the euro unless the government went through with that foolish pledge," said Legrain.

Between 2011 and February 2014, Legrain was principal adviser at the Bureau of European Policy Advisers, the in-house think tank which provides economic advice to Commission president Jose Manuel Barroso.

Meanwhile, he laid the blame for 'bullying' tactics at the door of the Commission, Germany and the ECB.

"I think the bullying came from Germany because German banks were exposed a lot to Ireland and from the European Commission which aligned itself close to Germany . . . and it came from Jean Claude Trichet who sought to advance the interests of French banks," he said, adding that "in effect EU institutions were putting the interests of those banks ahead of those of Irish citizens".

Legrain also argued that the Irish government could have resisted the harsh terms demanded by Brussels and Frankfurt.

"Irish ministers should have said that it was unjust and unbearable for Irish taxpayers to bear in full the debts of Irish banks . . . which were largely owed to foreign banks who should logically have taken losses on their bad loans," said Legrain, opining that the ECB "would have blinked" because "depriving Ireland of the euro would have been seen as an abuse of power . . . and could have caused the euro to have unravelled."

When its banking sector collapsed, leaving the taxpayer to assume responsibility for multi-billion euro liabilities, most of which were accrued on the back of an unsustainable property boom, Ireland saw its budget deficit rocket to 35 percent of GDP in autumn 2010. As market confidence evaporated, Ireland was forced to accept a three year €67.5 billion three-year bailout programme.

Although Ireland successfully completed the programme last December after putting in place over 270 separate cost-cutting measures, and saw its economy return to growth in 2013, at 125 percent Ireland's debt burden is five times larger than the 25 percent of GDP it was in 2007, before the financial crisis.

As a former official, Legrain's remarks will sting the EU executive, which is highly sensitive to criticism of its handling of the crisis. In his remarks, Legrain also accused the Commission of having been "completely out of its depth". The Commission has often pointed to Ireland as a paragon of virtue among the country's to receive a bailout, by sticking closely to its austerity programme.

For his part, in a speech last December, Barroso rubbed salt into Ireland's wounds by claiming that the EU rather than Ireland had been the real 'victim' in the crisis.

"The Irish banks that created a big problem for Ireland but also the other countries in the euro area," he commented, adding that "it would be wrong to give the impression that Europe has created a problem for Ireland."

Analysis

Lessons from Ireland's failed bank guarantee

Five years after the failed Irish experiment of giving a blanket state guarantee for banks, the EU has more rules in place, but taxpayers' money is still on the line.

Letter shows ECB threat ahead of Ireland bailout

The ECB on Thursday formally made public a letter showing that the eurozone bank threatened to pull emergency bank funding if Ireland did not enter a bailout and undertake austerity measures in 2010.

Irish voters reward Sinn Fein, punish government parties

Irish voters on Friday gave a strong signal to the government that they have tired of austerity, reaching out to alternative parties in the local elections and on course to do the same for the EU vote.

Opinion

How should EU reform the humanitarian aid system?

The example of Ukraine illustrates that donors like the EU should be more ambitious about the localisation of aid. And this funding to local actors needs to be predictable, flexible, and longer than the typical one-year funding cycle.

Latest News

  1. How Moldova is trying to control tuberculosis
  2. Many problems to solve in Dubai — honesty about them is good
  3. Sudanese fleeing violence find no haven in Egypt or EU
  4. How should EU reform the humanitarian aid system?
  5. EU suggests visa-bans on Israeli settlers, following US example
  6. EU ministers prepare for all-night fiscal debate
  7. Spain's Nadia Calviño backed to be EIB's first female chief
  8. Is there hope for the EU and eurozone?

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Stakeholders' Highlights

  1. Georgia Ministry of Foreign AffairsThis autumn Europalia arts festival is all about GEORGIA!
  2. UNOPSFostering health system resilience in fragile and conflict-affected countries
  3. European Citizen's InitiativeThe European Commission launches the ‘ImagineEU’ competition for secondary school students in the EU.
  4. Nordic Council of MinistersThe Nordic Region is stepping up its efforts to reduce food waste
  5. UNOPSUNOPS begins works under EU-funded project to repair schools in Ukraine
  6. Georgia Ministry of Foreign AffairsGeorgia effectively prevents sanctions evasion against Russia – confirm EU, UK, USA

Join EUobserver

Support quality EU news

Join us