The ECB and Ireland: Bailout But no Bail-In

Vincent Boland and Peter Spiegel suggest in the FT that the ECB coerced Ireland into applying for a bailout in 2010, based on letters recently released by the ECB. The ECB, in contrast, argues that the bailout was unavoidable anyway, and that the Irish Minister for Finance shared this view. In a Q&A section on its website the ECB writes:

While the ECB always acted within its remit and in line with rules established for the whole of the euro area, there are limits to the support that the Eurosystem can provide to banks in the Member States. … First, collateral has to be adequate; and second, counterparts have to be financially sound and solvent. The letter dated 15 October 2010 from the former ECB President recalled these rules and their implications for Ireland. … [Another letter dated 19 November 2010] explained the conditions under which further provisions of ELA to Irish financial institutions could be authorised. In his already public reply of 21 November 2010, the Irish Minister for Finance stated that he fully understood the concerns raised by the ECB Governing Council.

The ECB also addresses the question why it opposed the bail-in of bondholders in 2010:

As regards the possible bailing-in of senior debt in late 2010, it is important to recall the words of EU leaders in a European Union statement of 29 October 2010 and during the G20 meeting in South Korea on 12 November, according to which burden-sharing of senior debt would not be applied until mid-2013. … Furthermore, the necessary EU governance tools to address the bail-in of creditors, which were set out in the Bank Recovery and Resolution Directive (BRRD) and have been fully endorsed by the ECB, were not available in late 2010. … any potential burden-sharing of senior debt in the immediate aftermath would first and foremost have had negative spillover effects on the financial stability of Ireland, as well as on other European countries.