Dr. Michael Somers:

Brendan, Jean-Claude, ladies and gentlemen. I am not quite sure why I am here today, whether I am the last person who did not say no or I did not say no forcibly enough or what. But when I woke up this morning I was thinking, you know, I'd love to stay in bed for another hour but I have to get up and write something to say here today. And Brendan has warned me not to go beyond ten minutes ... so at least I think many of you down here have much more interesting questions and comments to make than I will have to make.

I know Jean-Claude for very many years. I'll just make a few comments about the interaction we have had over the years. I first met him in 1987, when I was appointed as the Irish representative through the EC monetary committee and Jean-Claude was the head of the French Trésor. This was all new to me, I had not been at this particular group before. In fact, I had spent the previous few years as Secretary of the Department of Defence and when I went in ... it's always interesting to see the interaction between different people ... but Jean-Claude was the French representative and Hans Tietmeyer was the German representative. And I'm not sure whether you remember this or not Jean-Claude, but you used to come under increasing pressure from Hans Tietmeyer to devalue the French franc and you had decided you were going to adopt a strong French franc policy. And I remember Hans saying to you that you had to devalue the French franc and you absolutely refused, and he said "If you won't devalue the French franc, I will revalue the Deutschemark". And you said to him "If you revalue the Deutschemark, I'll revalue the French franc on the same day by exactly the same amount". This went on, you know, over several months. And anyway it was a stalemate ... nothing happened.

But we came together actually then in 1990. When the Soviet Union broke up, I got a phone call one time from our then Taoiseach, Mr. Haughey, who told me that President Mitterand had been in touch with him and felt there should be a new body set up to fund investment in Eastern Europe, in the former Soviet Bloc, and to go over and talk to this man Attali. I didn't know what I was supposed to be doing and I rang Jean-Claude and he kind of gave me a bit of guidance. And he met me in his ... the hotel I was staying in and the two of us drove over to Jacques Attali's apartment. I don't know whether you remember any of this Jean-Claude. And the problem was that my French wasn't very good. They were all speaking French. Attali had two parrots, or some sort of birds anyway, who proceeded to talk as well. So in the end I said "Well, look, you'll either have to talk in English or you'll have to talk a lot more slowly because I don't know what I am supposed to be doing". Anyway, we eventually met as the 12 member states sat around the table and ... it was kind of an interesting exercise. We used to meet almost every weekend, trying to sort out a new bank. And it was actually, I think ... I chaired the EU group, then there was the OECD group, then there was the wider group, which included the Russian Federation and all these other countries. But we got the thing signed, sealed and delivered by May. The Irish had the Presidency for the first half of 1990. We started in January, we had the whole thing done by May. And the thing was set up very quickly afterwards. So it was a great success.

I had a lot of interaction with Jean-Claude then thereafter in various guises. I visited him in Bercy when he was the head of the Trésor. I visited him in the Banc de France when he was Governor of the Bank of France. I used to meet him on and off but one of the most difficult things was, when the currency crisis broke, and the NTMA was not particularly involved with the banking sector. But when NAMA was being born, the late Brian Lenihan said to me "Would you go over and meet Mr. Trichet and tell him that we need an awful lot of money?", and I said "Well would it not better if the Central Bank or the Department of Finance went over because it's really up to them?" So he said, "No no, you know him, you go over, you'll be able to persuade him." So anyway, I went in to see Jean-Claude and after the usual pleasantries and telling him where we stood, I said to him "By the way, we have a bit of an issue here. We're going to need a fair bit of money in the near future" and I said "This is going to be the end of a beautiful friendship". I said "We need about €60 billion." I thought he'd fall off his chair but he didn't. He just looked at me and we continued on. We did get an awful lot of money from the ECB, and I think Jean-Claude was always a good friend to us. Certainly he was ... personally, we have always been very close, so I was delighted to see him again here today.

As I said, Brendan has warned me not to go on. Just to say to you, I was for many years responsible for managing the national debt, both in the Department of Finance and in the NTMA. And we could never borrow enough money of course, in the State here, to fund our requirements. So we borrowed in every currency and country that you could think of and we had exposures then in a vast range of different currencies. The challenge, of course, was to try and manage these so that the cost to us wasn't enormous. Because there was always the risk ... well, first of all, that our currency would devalue, which it did fairly regularly, and secondly, that other currencies would revalue, so we' get a double whammy. And we tried every imaginable device to try and minimise the exposure we had and the exchange rate, with very mixed results I have to say. I mean, I became convinced that you couldn't actually predict foreign exchange rates. So within the EMS then, of course, that provided a certain amount of stability for us because, in theory, the currencies only moved a little bit against each other. But, of course, you could devalue. I remember in '92-'93 ... in '92, when the British left the EMS arrangements, we came under ferocious pressure from the international markets. And I remember ... because they reckoned we were going to be next and they would force us to devalue. And, you know, when the markets take a view on you, it's very hard to resist.

But anyway, the Central Bank ... there was no good economic reason, we thought, to devalue the Irish pound, and to try and protect the Central Bank by jacking up interest rates to 100% each weekend, you know, to catch the speculators. Eventually, in early 1993, the clinch point was when the banks threatened to push up mortgage rates, and we think mortgage rates are high now, they were 14% then, and the banks threatened they were going to shove them up to 18%. And I remember the late Maurice Doyle, who was Governor of the Central Bank, saying, "Look, we fought the good fight. There is a point when, you know, courage turns into stupidity and we'd have to agree to a devaluation." So anyway, we devalued the Irish pound by 10% and moved on.

So I was delighted, really, when the single currency came along, because it meant that we could borrow, first of all, at very low rates of interest, and secondly, without any exchange rate risk and the amounts were certainly adequate for our purposes. We didn't have to go into all these other capital markets again in the future. So by the time I eventually left the NTMA, towards the end of 2009, our net national debt was down to about 25% of our ... of our, I can't remember if it was GNP or GDP. But anyway, it was very low.

The real problem was, when we joined the single currency, as I've said many times before, you know, we joined ... we effectively joined a German team or a German, whatever you like to call grouping, but we continued to play by our own rules, and that eventually caught us out, and so we end up in the difficult situation which we found ourselves for the last few years. Much of it of our own doing, I have to say. And so be it. Okay. So, I've nothing in particular more to say. I thought Jean-Claude's exposé of the whole system was extremely interesting and I'm sure that people will pore over every word he said for many years to come and it'll probably end up in all kinds of textbooks. So thank you all indeed very much and thank you, Jean-Claude, for your very interesting speech.