Project Red: How Ireland got IBRC liquidation deal across the line
In this extract from his memoir, ‘Inside the Room: the untold story of Ireland’s crisis government’, Eamon Gilmore explains how the promissory note deal and the liquidation of the IBRC was negotiated
‘OF great importance in the decisionmaking process were the German Governors of the ECB. Over my time in office, I had worked to develop a good relationship with the German SPD. In October 2012, I had shared a platform at the Friedrich Ebert Foundation with Peer Steinbruck, the former German Finance Minister who would be the SPD candidate for Chancellor in the 2013 General Election.
He came to Dublin on Sunday 3 February and I met him privately, and asked him to help.
By early February, the tensions were ratcheting up, as another meeting of the Governing Council of the ECB was approaching, with few such meetings remaining before the March deadline for the instalment on the prom note to be paid. I made it clear to the Taoiseach that Labour simply could not continue in government if that happened, although to be fair to him he was equally determined to resist payment.
The ECB Governing Council meeting was to happen over two days – 7 and 8 February. The EMC was gearing up in the hope that agreement would come from Frankfurt, so that we could go ahead with the liquidation. In the early afternoon of 7 February, the EMC was actually meeting when an official from the Department of Finance came into the Sycamore Room with a note for Michael Noonan – the Department press office had received a media enquiry asking if it was true the IBRC was going to be liquidated.
At this point, immediate action was needed, and the meeting adjourned so that Michael could effectively take over the bank – he signed an order to vest the powers of the board in an employee of KPMG and a team from KPMG was immediately sent in to take over the bank. This gave a breathing space, but only a short one.
A few hours later, in the early evening, the EMC reconvened, for an update from Frankfurt. Here the news was bad. The matter had been raised, but no decision was taken – they were going to sleep on it! You could have cut the tension in the room with a knife. Everyone realised that this was decision time. Would we now proceed with the legislation to liquidate IBRC, or would we wait until morning in the hope that the ECB would agree to the deal? Finance officials briefed that it would be possible to hold off, now that the order had been signed.
I was absolutely clear in my own mind, however, that we had to move. The Taoiseach agreed with me, and the decision was made to proceed.
A full cabinet meeting was called to update the Government and agree the legislation, and Michael Noonan then went into the Dáil for an all-night session. It was an arduous task for him and his officials – the bill liquidating IBRC was signed by the President the next morning at 7am. Officials flew to Rome where the President was on a State visit, so that he could consider the contents of the bill on the way back.
The following day, the hours ticked by, still with no word. Finally, around noon, I got a call from Patrick Honohan. After sleeping on it, the ECB had asked for some modest amendments to the plan, which he believed were acceptable. In legal terms, what was being proposed was an action of the Irish Central Bank, so the ECB simply ‘noted’ it, but that was all we needed. This may have seemed like a modest enough endorsement, but in effect it was a massive step forward.
After two years of tough negotiation and hard decisions, it was now clear that the financial viability of the State would be assured. The EMC then held a very brief meeting. The atmosphere had changed and the mood was now positively light-hearted! It was a real pleasure to be able to congratulate Ann Nolan, the Second Secretary General from the Department of Finance who had been in charge of the detailed management of Project Red.
It was one of the shortest meetings we ever held, as we moved quickly to hold a full Cabinet meeting and to announce the deal to the Dáil.
For the very first time since the crisis began, I felt absolutely sure that we were going to succeed, that Ireland would recover and that better days lay ahead.