Let Me Tell You: Series 2 Ep 2 — Remembering when Ireland teetered on the economic cliff edge
Brendan Howlin revealed how Ireland nearly ditched the euro and reverted to printing the punt. Picture: Sam Boal/Rollingnews.ie
In late 2015, then-Taoiseach Enda Kenny caused something of a stir when he claimed that he was warned to have the army on standby in order to prevent a run on the banks in 2012 amid concerns over the stability of the euro currency.
Speaking in Madrid, Mr Kenny said: “The Governor of the Central Bank in Ireland said to me, ‘It looks like this weekend ... you’ll have to put army around the banks and around the ATM machines and introduce capital controls like they had in Cyprus’. So we’ve pulled back from that brink.”
But the remarks by Mr Kenny about having the banks on standby were seized by the opposition, who asked why Mr Kenny failed to mention the scenario during his appearance before the Banking Inquiry earlier that year.
A few days later, Kenny was forced to acknowledge that then-Governor Patrick Honohan had given him no such specific briefing.
Fianna Fáil’s then-finance spokesman Michael McGrath said: “The Taoiseach’s story of plans to deploy the army to protect ATM machines has, predictably, collapsed.”
However, it now turns out that Kenny was at least partially right about what was going on.
Speaking to the ’s ‘Let Me Tell You’ podcast , former Labour Party leader and Minister for Public Expenditure Minister Brendan Howlin has revealed for the first time just how close Ireland came to scrapping the euro and reprinting the punt.
And part of that was a top-secret plan to close the banks for at least three days.
In a truly stark discussion, Howlin, who along with Michael Noonan was charged with devising the plan to re-float an independent Irish punt in the case of the euro collapse, reveals how bad things had gotten.
“We thought things were terribly, terribly, terribly bad. But things got immeasurably worse. Because what I suppose people saw as an Irish crisis for Europe, became a European crisis for Ireland, in terms of the potential impact of the collapse of one of the major currencies in the withdrawal of a country,” he said.
“The one that most came into focus in 2012 was Italy. And it was crystal clear to us if Italy withdrew from the euro, the euro itself might well implode.
“And that was one of the most tense periods, in the summer of 2012, when we had to prepare ourselves for that potential happening.
“It was the most difficult period, as I say, since independence in my judgement, because we genuinely, day to day didn’t know whether Ireland economically could survive,” he said.
Asked exactly what would have happened had Ireland been forced to scrap the euro, Howlin replied bluntly.
“And the debate was, could we get away with closing for three days, it would have to be longer, it probably would have to be longer,” he said.
Mr Howlin said the government wanted to avoid a repeat of scenes in Greece where people were outside banks looking for their money in the case of a collapse.
“We would have had to fix a new rate for our free-floating pound. And then it would have to find its own value in an international market. That wouldn’t have been a very happy set of circumstances as you can imagine,” he added.
The plan had been developed over several months between officials in the Central Bank and the Department of Finance under intense secrecy.
“We obviously had to be very restricted in the number of people who could be aware that we were planning for the return of the pump.
“I mean, it became black humour, as to whose face will be put on the pound, We knew that we would have to figure out how long it would take to print,” he said.
“And we actually had practical presentations in terms of how long would it take to print notes and coins, how long would we have to close the banks, how would people access credit for the period of time,” Howlin said.
Among the issues being considered was just what form this new currency would take.
While he said he discussed with his then Secretary General about how they would procure enough printing paper for the new currency without going through normal tendering rules without being spotted.
There were also plans being developed by the Central Bank that the existing euro currency could have been used even temporarily with some form of an additional sticker on it.
When asked whose face would be on the face of the new currency, Howlin responded by saying: “The black humour was that we have to put Michael D’s.”
Joking aside, the key consideration of this secret plan was just that, keeping it secret, especially as Howlin explained there was endless commentary that this was a possibility.
“The only thing we didn’t want to go out is that we were actively preparing for reacting to such a possibility. And I don’t recall anybody asking me the direct questions. Well, is there a law drafted? Do you have a design for money? What are you going to do in terms of securing credit, protecting deposits and so on in those eventualities, but they were the sort of things we were preparing for,” he said.
The need to ultimately pull the trigger was averted by the arrival of Mario Draghi as ECB Governor who committed the bank to doing “whatever it takes” to bolster the currency.
Howlin recalled walking down Baggott Street in Dublin at that time and being startled at people behaving normally, not knowing how close the country had come to “total ruination” as he called it.
He admitted that it was a mistake not to have revealed the scale of the effort done to protect the country at that time.
That mistake would go on to cost his party very heavily at the 2016 General Election when it was reduced down to just seven seats.
Despite that cost, Howlin said he was “proud” of the work done by him and his party to save the country.
