Updated: 4.25pm
THE DEPARTMENT OF Finance had a small group of people working on a contingency plan for Ireland exiting the euro.
Kevin Cardiff, former Secretary General at the Department of Finance, told the banking inquiry he had denied the existence of such work in the past.
“This was dynamite stuff … The notion that you would sit down in a committee and declare that was just ridiculous.”
Cardiff said “a very small group of people” drafted a number of contingency papers in case we were “unceremoniously shown the door or if that was the only option”, adding it was never preferable to default.
He noted that Ireland wasn’t the only country working on a secret default plan, recalling an official from “another jurisdiction” asking him: “Could you have who’s not working on it in your office telephone who’s not working on it in my office?”
In another revelation, Cardiff said he made “discreet inquiries” on how a country goes about entering an International Monetary Fund (IMF) bailout programme in 2008, two years before we had to do this.
Again, he said this was a contingency plan and he wasn’t fully convinced Ireland would need to follow through.
Cardiff said the IMF told the government such a programme would be available if necessary, but then Finance Minister Brian Lenihan said we would not engage with this suggestion.
Later in the meeting, Cardiff joked about the existence of a “Johnny Logan working group” – tasked with finding an extra year’s worth of national funding.
All together now:
Burning bondholders
On the issue of burning bondholders, Cardiff reiterated comments he made to the inquiry last week – where he said then IMF chief Dominique Strauss-Kahn was in favour of burning senior bondholders and thought he could “persuade” other major players to agree.
He was wrong and received “a very negative reaction”, from people including Timothy Geithner, then Secretary of the Treasury in the US, and the European Central Bank’s then chief Jean-Claude Trichet.
Cardiff said Lenihan had “one very optimistic day” where he thought bondholders could be burned.
When Fianna Fáil Senator Marc MacSharry asked if the content of speeches or public comments written by the Department of Finance for Lenihan was ever affected due to “raw vote getting”, Cardiff said: “That’s how democracy works, I’m afraid.”
Cardiff, who worked at the department from 1984-2012, noted that “no one paid as much as [Ireland]” when helping to save the euro.
Greece’s ‘shite problem’
Cardiff said the current Greek crisis is “quite a bit deeper even than ours”, adding: “Our heart goes out to them.”
However, he refused to be drawn on whether or not he would have negotiated differently with the Troika “with the benefit of hindsight”.
Cardiff said he didn’t wish to elaborate on the situation in Greece as his appearance before the committee last week was reported in the country’s financial papers.
They’re in the middle of a really shite problem so let’s leave them alone.
Seemingly a little surprised by the use of the word ‘shite’, MacSharry said “okay” and moved on.
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