Trichet letter

Scofflaw

Sand wrote: »

The ECB wasnt providing the liquidity. The CBI was. There is no upper limit to the funding an NCB can provide. The ECB now acknowledges that and is currently dumping vast amounts of money into banks which are only solvent by very generous interpretations.

Basically, there is a whole lot of conventional wisdom about the ECB legally couldnt and cant do as regardings providing liquidity. If the past few years have taught us anything it is that the ECB is able to justify doing whatever it feels it needs to do. Trichet was a raving fiscal hawk - he was not rational in that regard. When he was removed, suddenly solutions were possible and the Eurocrisis subsided dramatically. There is link between Trichet and the way the crisis got worse and worse over his reign.

True on the last bit - far too rigid and conservative for a crisis.

However, ELA is not provided by NCBs except by reference to the ESCB they're all part of, and with the agreement of the Governing Board. When you say that NCBs can provide unlimited liquidity, that's legally true. But when the ECB letter says that the ECB have the power to impose conditions on its use, that's also true.

Those two points don't contradict each other, but the second point means that an argument based on the CBI providing unlimited liquidity without the ECB's assent is patent nonsense. And the ECB's assent is conditional. That's pretty much the heart of the matter - they had the right to set conditions on the ELA, and did so. One can argue that they should not have done so, but not that they weren't legally allowed to do so - and if one wants to argue the former, one needs to provide a good clear reason why, which has not yet been offered.

cordially,
Scofflaw

View

Sand wrote: »

The ECB wasnt providing the liquidity. The CBI was.

The CBI is part of the ESCB. Any liquidity it provides impacts the rest of the Eurosystem to a greater or lesser extent.

Sand wrote: »

There is no upper limit to the funding an NCB can provide.

Of course there is an upper limit even if it is not explicitly spelled out.

You are not seriously trying to suggest that, let's say, the Central Bank of Slovenia could provide an infinite quantity of ELA without others rapidly deciding this constituted a threat to the Eurosystem and vetoing such actions, are you?

Sand wrote: »

The ECB now acknowledges that and is currently dumping vast amounts of money into banks which are only solvent by very generous interpretations.

Are you now suggesting that banks here in Ireland were solvent back then or was the ECB supposed to ignore solvency concerns because the banks were Irish ones?

Sand wrote: »

Basically, there is a whole lot of conventional wisdom about the ECB legally couldnt and cant do as regardings providing liquidity. If the past few years have taught us anything it is that the ECB is able to justify doing whatever it feels it needs to do.

What the last few years have shown us is that any and all attempts to challenge the legality of the ECB's and/or the respective governments have failed completely in the courts. You are welcome to go to court to challenge them again if you want.

Sand wrote: »

Trichet was a raving fiscal hawk - he was not rational in that regard. When he was removed, suddenly solutions were possible and the Eurocrisis subsided dramatically. There is link between Trichet and the way the crisis got worse and worse over his reign.

Trichet was one person with one vote on a 20+ council. Unless you regard him as having THE key "swing vote" - and there is no evidence he had - then it clearly wasn't the presence or absence of one person on a council that made the difference.

Rather, time took its toll, and even the more obstintate financial traders gave up hoping for the Euro's imminent demise and moved on looking for easier pickings.

Scofflaw

By the way, have to give Permabear kudos for this rather prescient post on the 15th November 2010:

Permabear wrote: »

This post has been deleted.

cordially,
Scofflaw

Scofflaw

Frank Lee Midere wrote: »

The Irish were partially responsible for the housing boom. The major factor was over loose credit. Which is fairly obvious because the housing collapse was not confined to Ireland.

Had we the punt we would be in better shape.

I don't know about that. Whatever view one takes of Iceland's response to the crisis, they managed everything we managed - bloated banks, property bubble, crisis, IMF bailout - despite the kroner. They got capital controls on top, which are only being taken down now. What capital controls would have done to our MNC sector is not something nice to think about.

And, as became evident recently, the CBI had tools at its disposal that would have helped calm the bubble - the 20% deposit rule, the additional prudential requirements - but didn't even think about them, let alone think about using them. No law has changed to make such micro-economic levers available, the CBI simply didn't even investigate their possibility during the bubble because it didn't accept that there was a bubble.

So the idea that we would have done anything different had we had the punt strikes me as rather wishful thinking.

cordially,
Scofflaw

Frank Lee Midere

Scofflaw wrote: »

I don't know about that. Whatever view one takes of Iceland's response to the crisis, they managed everything we managed - bloated banks, property bubble, crisis, IMF bailout - despite the kroner. They got capital controls on top, which are only being taken down now. What capital controls would have done to our MNC sector is not something nice to think about.

And, as became evident recently, the CBI had tools at its disposal that would have helped calm the bubble - the 20% deposit rule, the additional prudential requirements - but didn't even think about them, let alone think about using them. No law has changed to make such micro-economic levers available, the CBI simply didn't even investigate their possibility during the bubble because it didn't accept that there was a bubble.

So the idea that we would have done anything different had we had the punt strikes me as rather wishful thinking.

cordially,
Scofflaw

What we would have done is keep interest rates higher as the CBI historically had. Although it's possible we may have tracked the ECB rates. Better if there were no Euro.

And we don't know if those measures would have been enough. Let's see if it dampens the present boomlet.

FreudianSlippers

Sand wrote: »

I stated it several times in my post. The ECB made its support for certain banks dependant on a particular government (Ireland) carrying out specific policy actions. This is different to the ECB changing its policies on ELA across the Eurozone, that Irish banks may or may not meet. The ECB has significant, exceptional powers - it was not granted them to use them for its own ends or to use them to subvert governments with a democratic mandate. "Give me control of a nation's money and I care not who makes it's laws".

Colm McCarthy referred to this point as well, stating that the government could and should have referred the matter to the ECJ to make a decision on if the ECB breached the limits on its powers. Putting aside all the parochial Irish issues, there is a constitutional issue where a very powerful institution without a mandate has used its powers to force a policy on an elected government of a member state without having any expertise or right to do so.

I have a little blue copy of the Constitution in my office. What Article are you alleging has been violated here?

Scofflaw

FreudianSlippers wrote: »

I have a little blue copy of the Constitution in my office. What Article are you alleging has been violated here?

I think that's constitutional with a small "c" - as in, an issue of institutional powers within the makeup of the EU.

And I think that's an open point for discussion, even though I don't see how the ECB breached its powers - it does have the power to set conditions on its aid, and there are no limits set to the conditions it can set.

One can certainly argue that what the ECB did was improper and unexpected, and that an unelected institution such as the ECB should never dictate such terms to a sovereign democratic government - I'd regard such an argument as erecting principle over reality, and we clearly have exactly such a system in place in the form of the IMF, personally, but it's a rational position.

cordially,
Scofflaw

dlouth15

Scofflaw wrote: »

One can certainly argue that what the ECB did was improper and unexpected, and that an unelected institution such as the ECB should never dictate such terms to a sovereign democratic government - I'd regard such an argument as erecting principle over reality, and we clearly have exactly such a system in place in the form of the IMF, personally, but it's a rational position.

Different in the case of the IMF I think. The IMF on its own has no power to compel a nation, no matter how deep in debt it is, into a bailout. When a country does enter into bailout talks and agrees to a bailout, yes, sovereignty is given up, but this is done with the agreement of the government of that country.

In the case of the ECB and Ireland. The ECB itself (through the CBI) extended ELA to the Irish banks. Whilst it was extending this ELA, there were no political conditions attached. Conditions were only attached when the ECB threatened to withdraw ELA to the Irish banks.

There is no parallel with the IMF in this regard. A country knows exactly what it needs to do before any money is drawn down.

The ECB didn't want these letters published. They only released them because they were going to be handed to the banking enquiry and would eventually be made public. You can see why they didn't want them published. Any country with banks that make use of ELA, are at the mercy of the ECB who can withdraw that ELA for whatever reason unless arbitrary conditions are met. If you don't want the ECB to have that power then you have to forbid banks from making use of ELA. But this would probably be in breach of EU rules.

Scofflaw

dlouth15 wrote: »

Different in the case of the IMF I think. The IMF on its own has no power to compel a nation, no matter how deep in debt it is, into a bailout. When a country does enter into bailout talks and agrees to a bailout, yes, sovereignty is given up, but this is done with the agreement of the government of that country.

In the case of the ECB and Ireland. The ECB itself (through the CBI) extended ELA to the Irish banks. Whilst it was extending this ELA, there were no political conditions attached. Conditions were only attached when the ECB threatened to withdraw ELA to the Irish banks.

There is no parallel with the IMF in this regard. A country knows exactly what it needs to do before any money is drawn down.

What you mean, I think, is that the ELA had not come with conditions up to that point, which is true. But the ELA had also not been at such levels - Irish bank borrowing from the ESCB went from €14 billion before the guarantee to €49 billion at the end of the guarantee, and then jumped to €88 billion by November - so it had gone up by more in two months than in the previous two years.

The ECB had all along the right to impose conditions, and the increasing ELA was subject to regular review (the majority of the ELA is on a weekly basis), so the idea that it could have conditions attached at any time was always true. If the Irish government ignored that - and I grant you they seemed to do so - that doesn't change the fact that such conditions could be imposed at any time, and were likely to do so if there was a sudden jump, as there was.

If, on the other hand, you're claiming that the ECB somehow did something it hadn't been entitled to do at any point all along, no, that's not the case.

The ECB didn't want these letters published. They only released them because they were going to be handed to the banking enquiry and would eventually be made public.

If they weren't to be released, they wouldn't have been released to the banking inquiry, or they could have been shown to the banking inquiry as they were to the Ombudsman without public release, so I think that's just made up. The DoF have still not ever agreed to release their versions.

You can see why they didn't want them published. Any country with banks that make use of ELA, are at the mercy of the ECB who can withdraw that ELA for whatever reason unless arbitrary conditions are met.

Yes, they do have the power to impose conditions in exchange for you using their money. Strangely enough.

If you don't want the ECB to have that power then you have to forbid banks from making use of ELA. But this would probably be in breach of EU rules.

I don't see how it would be in breach of EU rules. If the Irish government didn't want the ECB to impose conditions it need only have replaced the ECB's ELA with other funding, or possibly not have let its banks get into such a mess beforehand. It remains the case that while the ECB was always entitled to impose conditions for the use of its money, the only reason it was able to impose conditions was because the government had spent the previous two years not actually sorting out the banks. The plan really does seem to have been to go on kicking the can of banks down the road, and letting the ECB keep pouring money into it while we did so.

You can see why they might not see that as a good plan.

I think we'll all keep going round in circles as long as people want to describe as 'duress' the facts that the ECB wasn't actually obliged to go on supporting Irish banks no matter how little our government did about the problems in them, were entitled to set conditions on the ever-growing use of their money to prop them up, and did so.

cordially,
Scofflaw

Godge

dlouth15 wrote: »

Different in the case of the IMF I think. The IMF on its own has no power to compel a nation, no matter how deep in debt it is, into a bailout. When a country does enter into bailout talks and agrees to a bailout, yes, sovereignty is given up, but this is done with the agreement of the government of that country.

In the case of the ECB and Ireland. The ECB itself (through the CBI) extended ELA to the Irish banks. Whilst it was extending this ELA, there were no political conditions attached. Conditions were only attached when the ECB threatened to withdraw ELA to the Irish banks.

There is no parallel with the IMF in this regard. A country knows exactly what it needs to do before any money is drawn down.

The ECB didn't want these letters published. They only released them because they were going to be handed to the banking enquiry and would eventually be made public. You can see why they didn't want them published. Any country with banks that make use of ELA, are at the mercy of the ECB who can withdraw that ELA for whatever reason unless arbitrary conditions are met. If you don't want the ECB to have that power then you have to forbid banks from making use of ELA. But this would probably be in breach of EU rules.

We could have told the ECB to f. off, left the euro overnight, set up our own currency and borrowed on the international market to fund our banks, couldn't we because we didn't need any help from anyone?

Oh, we couldn't, well not without 50% welfare and pay cuts plus a 25-30% unemployment rate within six months. We were in deep **** and the only people willing to help us wanted to impose conditions. And some of you have a problem with that.

dlouth15

Scofflaw wrote: »

What you mean, I think, is that the ELA had not come with conditions up to that point, which is true. But the ELA had also not been at such levels - Irish bank borrowing from the ESCB went from €14 billion before the guarantee to €49 billion at the end of the guarantee, and then jumped to €88 billion by November - so it had gone up by more in two months than in the previous two years.

The ECB had all along the right to impose conditions, and the increasing ELA was subject to regular review (the majority of the ELA is on a weekly basis), so the idea that it could have conditions attached at any time was always true. If the Irish government ignored that - and I grant you they seemed to do so - that doesn't change the fact that such conditions could be imposed at any time, and were likely to do so if there was a sudden jump, as there was.

Yes and in hindsight we know all this. But prior to these letters being published yesterday and also the speculation about what was in them from 2012, we had no idea that the ECB was engaging in this sort of activity. If in 2011 one had suggested that if Ireland hadn't entered a bailout - in addition to what ever other reason Ireland might have required one - that the ECB would shut down the ATMs, I think quite reasonably, you would have been dismissed as a conspiracy theorist.

If, on the other hand, you're claiming that the ECB somehow did something it hadn't been entitled to do at any point all along, no, that's not the case.

It is more that this power is not fully appreciated by the public at large. Other than these letter, whose existence we would not even be aware of if the ECB had their way, we have no way of knowing what decisions are being made for us by the ECB.

For example, there were a lot of debates about the wisdom of bondholders sharing in the cost of their decision to invest in failed banks like Anglo. Most of these centred around how markets would react to such an action. I don't think prior to 2012, anyone thought that there was no point in any of these debates for the simple reason that such burden sharing was never going to happen anyway regardless of what the government thought was the right thing to do. The decision had already been made for us that there would be no burden sharing.

If they weren't to be released, they wouldn't have been released to the banking inquiry, or they could have been shown to the banking inquiry as they were to the Ombudsman without public release, so I think that's just made up. The DoF have still not ever agreed to release their versions.

They would have been discussed at length at that enquiry. Details about them (if not the actual text) would have emerged and the ECB would have had no control over this process. Safer to release them now when the ECBs own PR can be attached to them.

I don't see how it would be in breach of EU rules. If the Irish government didn't want the ECB to impose conditions it need only have replaced the ECB's ELA with other funding, or possibly not have let its banks get into such a mess beforehand. It remains the case that while the ECB was always entitled to impose conditions for the use of its money, the only reason it was able to impose conditions was because the government had spent the previous two years not actually sorting out the banks. The plan really does seem to have been to go on kicking the can of banks down the road, and letting the ECB keep pouring money into it while we did so.

I'm not disputing that the ECB do have these powers. What I'm arguing is that the implications of this power haven't yet been fully appreciated. We have no idea, for example, of how often the ECB uses these powers to influence government decisions or what those decisions are.

Frank Lee Midere

Godge wrote: »

We could have told the ECB to f. off, left the euro overnight, set up our own currency and borrowed on the international market to fund our banks, couldn't we because we didn't need any help from anyone?

Oh, we couldn't, well not without 50% welfare and pay cuts plus a 25-30% unemployment rate within six months. We were in deep **** and the only people willing to help us wanted to impose conditions. And some of you have a problem with that.

We were largely in deep **** because of the way the ECB was set up to begin with. In a normal monetary ( and fiscal union) the central banking and governmental authority can raise it's own bonds and basically takes on the responsibility of re-capitalisation out of it's own funds. It's not like the US forced New York to bail out AIG, GoldMan Sachs et al.

FreudianSlippers

Frank Lee Midere wrote: »

We were largely in deep **** because of the way the ECB was set up to begin with. In a normal monetary ( and fiscal union) the central banking and governmental authority can raise it's own bonds and basically takes on the responsibility of re-capitalisation out of it's own funds. It's not like the US forced New York to bail out GoldMan Sachs et al.

The US fed refused to bail out Lehman which, arguably, triggered the Troubled Asset Relief Program (people think our bailout was bad; $700bn was the US bailout and they didn't even save all of the banks!).

Also, I know it's slightly different, but the fed gov did bail out Freddie and Fannie.

Frank Lee Midere

FreudianSlippers wrote: »

The US fed refused to bail out Lehman which, arguably, triggered the Troubled Asset Relief Program (people think our bailout was bad; $700bn was the US bailout and they didn't even save all of the banks!).

Also, I know it's slightly different, but the fed gov did bail out Freddie and Fannie.

And AIG and Goldman Sachs. My point was that New York State didn't.

Godge

Frank Lee Midere wrote: »

And AIG and Goldman Sachs. My point was that New York State didn't.

The EU is not the USA, not by a long shot.

View

dlouth15 wrote: »

Different in the case of the IMF I think. The IMF on its own has no power to compel a nation, no matter how deep in debt it is, into a bailout. When a country does enter into bailout talks and agrees to a bailout, yes, sovereignty is given up, but this is done with the agreement of the government of that country.

Which is exactly what happened in Irleand's case - we choose to accept conditions because we did not wish to choose the alternative.

dlouth15 wrote: »

In the case of the ECB and Ireland. The ECB itself (through the CBI) extended ELA to the Irish banks. Whilst it was extending this ELA, there were no political conditions attached.

This is incorrect. Trichet's letter of 15th October clearly refers to "rules" - conditions in other words - in the opening line of the third paragraph. In other words, you must follow the rules/meet the condiditions if you want to avail of the system.

In addition, he clearly states the ECB may impose "specific condidtions" in paragraph 7 - a statement that Lenihan/Ireland accepted/did NOT dispute in the official response to his letter.

dlouth15 wrote: »

There is no parallel with the IMF in this regard. A country knows exactly what it needs to do before any money is drawn down.

And that was exactly the same in our case.

dlouth15 wrote: »

The ECB didn't want these letters published.

Actually, it was our government that asked the ECB not to release them initially. That may be because one of Trichet's letters mentions the question of solvency and our government presumably didn't want that being a major topic of public debate or concern.

dlouth15 wrote: »

If you don't want the ECB to have that power then you have to forbid banks from making use of ELA.

You probably could do that but please don't tell me most people here would have been happy if Trichet had said "Sorry you have used your credit with us up. Good luck in finding alternative funding".

That's a bit akin to refusing to go to A&E/call the fire brigade beacause you are determined not to incur the charge you pay at A&E or to call out the fire brigade.

View

Frank Lee Midere wrote: »

We were largely in deep **** because of the way the ECB was set up to begin with. In a normal monetary ( and fiscal union) the central banking and governmental authority can raise it's own bonds and basically takes on the responsibility of re-capitalisation out of it's own funds. It's not like the US forced New York to bail out AIG, GoldMan Sachs et al.

Having been in the States at the time I saw the aftermath of one of the Fed's decisions where they sold Washington Mutual - one of the bigger US banks - to a competitor for $1 while the CEO of WAMU was in flight and couldn't do anything about it.

How happy would people be if the ECB had forced the sale of Bank of Ireland for €1 to, let's say, Santander?

I suspect we'd have posters here claiming that Anglo was the best bank ever and that "we woz robbed" because of the ECB's decision. :-)

dlouth15

View wrote: »

Which is exactly what happened in Irleand's case - we choose to accept conditions because we did not wish to choose the alternative.

Well no I don't think anyone reasonably agree with that. The normal way of working with the IMF is that countries enter negotiations which can go on for weeks or months. Yes conditions are imposed but these are negotiated conditions. They are not proposed on a Friday evening with a decision required by Monday morning and no possibility of negotiations.

Rightwing

Godge wrote: »

We could have told the ECB to f. off, left the euro overnight, set up our own currency and borrowed on the international market to fund our banks, couldn't we because we didn't need any help from anyone?

Oh, we couldn't, well not without 50% welfare and pay cuts plus a 25-30% unemployment rate within six months. We were in deep **** and the only people willing to help us wanted to impose conditions. And some of you have a problem with that.

May not have been a bad thing in itself, if most of the job losses stemmed from the public sector.

View

dlouth15 wrote: »

Well no I don't think anyone reasonably agree with that. The normal way of working with the IMF is that countries enter negotiations which can go on for weeks or months. Yes conditions are imposed but these are negotiated conditions. They are not proposed on a Friday evening with a decision required by Monday morning and no possibility of negotiations.

As I pointed out already, Trichet clearly refers to condidtion in his first letter which was written several weeks/a month in advance of his second letter. That is more than enough time for the DoF here to have asked what those conditions might be and to have made some efforts to negotiate on them.

Second, a decision was not required by Monday morning as the ECB had just released funds under the old conditions the day before Trichet's second letter as he refers.

As for your view that discussions with the IMF about a possible bail-out can go on for months, it just isn't true I'm afraid. Once you are in bail-out territory the financiai markets have you in their sights and you need to make a decision one way or another.

Frank Lee Midere

Godge wrote: »

The EU is not the USA, not by a long shot.

And that too was my point. You know about monetary and fiscal unions.

The whole project was and is a disaster from conception to implementation.

dlouth15

View wrote: »

As for your view that discussions with the IMF about a possible bail-out can go on for months, it just isn't true I'm afraid. Once you are in bail-out territory the financiai markets have you in their sights and you need to make a decision one way or another.

Well I'm not sure about that. Ghana approached the IMF back in August of this year and as far as I'm aware negotiations are still ongoing.

Frank Lee Midere

View wrote: »

Having been in the States at the time I saw the aftermath of one of the Fed's decisions where they sold Washington Mutual - one of the bigger US banks - to a competitor for $1 while the CEO of WAMU was in flight and couldn't do anything about it.

How happy would people be if the ECB had forced the sale of Bank of Ireland for €1 to, let's say, Santander?

I suspect we'd have posters here claiming that Anglo was the best bank ever and that "we woz robbed" because of the ECB's decision. :-)

Firstly stop making your own strawman arguments. Nobody here supports Anglo.

Secondly we'd have been delighted if that involved taking the debt off the Irish taxpayer.

There really is a whiff of post colonial cringe here. The Irish CB and the government should have done more but in a currency union one doesn't normally blame local banks or governments for bad policies at the centre. The ECB should have known the risks of banks within its purview lending in the manner they did.

dlouth15

View wrote: »

Second, a decision was not required by Monday morning as the ECB had just released funds under the old conditions the day before Trichet's second letter as he refers.

Well the letter was dated the 19th which is a Friday. In the letter was the text:

I am sure that you are aware that a swift response is needed before markets open next week.

This would have been the following Monday morning. Trichet is clearly telling Lenihan to have his decision made over the weekend.

Sand

Scofflaw wrote: »

I think the ECB and the government both did focus on their jobs. The ECB's job was to look after the money it was lending Irish banks, which, contrary to your statements, was something directly under it remit, as per the letter, and constituted a very large amount - a total of about €120bn. The ECB, or the ESCB if you prefer, was not lending any such quantity anywhere else.

I have to clarify again - ELA is the remit of the relevant NCB, in this case the CBI. The ECB does not engage in ELA, it simply monitors ELA carried out by the various NCBs with a veto where the ELA impacts on their operations in the Eurosystem. ELA is an operation of the CBI and is carried on the CBI balance sheet, at the CBIs risk. Not the ECB.

I clarify again because there is this myth going around that the ECB were the ones providing the ELA. They were not.

120 billion sounds like a big figure, but relative to the Eurosystem money supply administered by the ECB at the time which was roughly 9,200,000,000,000,000 Euro (I might have missed a few euro there - anyway, whatever money is measured in after trillions, it was 9.2 of them) back in 2010. So Irish ELA was roughly 0.00001% of total Eurosystem money supply. I.E. it was relatively tiny and insignificant.

This comes on to a secondary point: that was the money supply at the time in 2010. However, today it is a 10,100,000,000,000,000. Thats an increase of roughly 10% in just 4 years. It's hard to make an argument that Irish ELA posed a clear or critical danger for the Eurosystem operations of the ECB when its happily overseeing monetary expansion of that scale in a few short years. Certainly the ECB couldn't make such an argument without hamstringing itself later.

So, again, I'd ask, is it your view that the ECB should have gone on tying up a third of its lending in the banking sector of a single country for the benefit of a government that was apparently happy to do nothing to change that?

And since that does in fact appear to be your view despite the evasions, why?

Should Emergency Liquidity Assistance have been exploited as a tool in an emergency? Should the ECB have swallowed its discontent and decide to not ask questions which might lead to answers which forced it to take harmful actions?

Yes. I think they should have. And the ECB thinks so too as its right now engaged in pumping liquidity into banks, relaxing or ignoring its own rules and generally upsetting the Bundesbank.

I also find myself in the unhappy position of having to defend Fianna Fail here, which you summarise as a government happy to do nothing to change things with regard to the Irish banks or the Irish state. As I recall it, by 2010, the government had already guaranteed most of the banks debts, had nationalised Anglo-Irish, had established NAMA with the stated (if mistaken) aim of crystallising bank losses on property and had already announced a budget with the aim of cutting the deficit by 6 billion euro in a single year. I recall that you were quite supportive of all these steps and the government plan - particularly NAMA - in general.

It's worth recalling Fianna Fail were carrying this out against a backdrop of Merkozy's Deuville brainfart, and the Trichet and the brain trust over at the ECB, particularly LBS, spreading panic and terror about peripheral states and banks. Ireland did indeed create its own problems, Europe then made them worse. Its worth noting that Irelands market access has improved dramatically over the past year or two without any improvement in Irish governance, but with a change in EU and ECB policy.

ECB action didn't do anything to *improve* the government response in Ireland, and never had that as an aim. It was simply aimed at achieving the ECBs own aims and appeasing Trichet's idealogical ambitions.

Those two points don't contradict each other, but the second point means that an argument based on the CBI providing unlimited liquidity without the ECB's assent is patent nonsense.

I'm not arguing that they can do it without ECB assent - I'm stating that there is no upper limit to what a central bank can do. A key point of the crisis was the ECB under Trichet encouraging the market to bet against the Euro and peripheral states by highlighting what it couldnt do.

A clear change when Draghi came on board was his statement that the ECB could and would do whatever it took to defend the Eurosystem. Once Draghi completely reversed the Trichet doctrine, the crisis abated dramatically (though is still not resolved). Trichet was a man who thought like a shopkeeper. Draghi is at least recognisably a Central banker.

And the ECB's assent is conditional. That's pretty much the heart of the matter - they had the right to set conditions on the ELA, and did so. One can argue that they should not have done so, but not that they weren't legally allowed to do so

Its conditional of course. What those conditions are is where the constitutional issue comes into play.

A judge can make judgements in a court case that can destroy peoples lives. It's an awesome power with heavy responsibility. They have no obligation to find for the defence or the prosecutor. A judge offering to find a defendant innocent in exchange for certain conditions....such as a bribe is clearly wrong.

A judge offering to find a defendant innocent where an defendant can prove their innocence is fine.

The ECB used its power to veto ELA to impose particular policies on the elected Irish government that it had absolutely no right or mandate to do so. I wouldn't even mind if the ECB had just vetoed further ELA and by extension had forced the government to a bailout - instead it explicitly demanded a course of action to not veto further ELA. There is a difference.

Now, I know there are people who think that in Ireland in particular, democracy is a bothersome obstruction to good governance which is best carried out by unaccountable technocrats, preferably foreign. So as not to bother the great and good with the interests of the knuckle dragging Irish. Those people will see absolutely nothing wrong with the ECB abusing its powers to explicitly force a government with a democratic mandate on to a particular course of action. Indeed, they will be quite frustrated by claims that it is problematic. Charles James Napier shared their frustrations, bemoaning that "so perverse is mankind that every nationality prefers to be misgoverned by its own people than to be well ruled by another".

Of course he meant the English, as opposed to the EU, but the sentiment is the same.