Brian Cowen

Record: prime minister during the banking guarantee and fiscal collapse

Brian Cowen became Ireland's taoiseach in 2008 after serving as finance minister during the credit-driven expansion of the preceding years. His period in office was dominated by the banking collapse, shrinking tax revenues and the difficulty of funding both the financial system and the state. On the night of 29–30 September 2008, senior ministers and officials considered a sweeping guarantee of the liabilities of six Irish banks. The Oireachtas banking inquiry's detailed reconstruction (opens in a new tab) names Cowen among those present and distinguishes testimony given years later from contemporaneous notes. The decision was collective Cabinet policy and a legal guarantee, rather than a private promise made by Cowen alone. The inquiry examined uncertainty about bank solvency, the scope of the proposed guarantee, and concerns about sovereign fiscal exposure. Its official findings (opens in a new tab) also record serious flaws in records of the crucial meetings. Cowen's office made him a central accountable actor, but neither the subsequent downturn nor every individual banking loss can be assigned solely to his actions without examining regulators, lenders, markets and earlier policies.

Consequences: bailout, public scrutiny and the limits of hindsight

By November 2010 Ireland had entered an EU-IMF financial assistance programme as the combination of bank recapitalisation needs and pressure in sovereign debt markets overwhelmed ordinary financing. In evidence to the parliamentary inquiry (opens in a new tab), Cowen described the urgency of the 2008 guarantee and the later negotiation of external assistance, while accepting that decisions were made under severe uncertainty. His testimony is important evidence of what he claimed to believe, not a substitute for the committee's independent conclusions. In June 2010 he publicly accepted responsibility for his decisions as critical reports about policy, supervision and bank lending were published, according to RTÉ (opens in a new tab). An accurate assessment separates political responsibility for choosing a guarantee from criminal culpability, which cannot be assumed, and from macroeconomic attribution, which involves external shocks as well as domestic decisions. The result was a major change in fiscal sovereignty, bank ownership and public resources, but numerical welfare effects require verified time-series evidence rather than a single assumed 'cost of Cowen'.