German politicians were not amused yesterday by allegations that Anglo Irish Bank executives derided Germans and deceived the Irish Government over the extent of their difficulties.
Days before the Taoiseach meets chancellor Angela Merkel in Brussels and, next week, in Berlin, the Anglo tape revelations have dragged back into the spotlight at an inopportune time one of the most tense moments in recent years between Ireland and Germany.
Like other leaders, Ms Merkel was caught unawares by Dublin’s unilateral bank guarantee in 2008 and became extremely concerned when bank deposits began to flow to Ireland as a result.
Tapes suggesting Anglo officials celebrated her displeasure with a burst of Deutschland, Deutschland Über Alles is a serious insult to German ears. The first verse, with its references to "Germany above all", was last sung as the national anthem in the Nazi era.
In Berlin yesterday, a finance ministry spokesman declined to comment on the tapes. But the official said events in Ireland from the 2008 bank guarantee scheme to the 2010 bailout “show beyond doubt that the scale of the problems in the Irish banking sector was gravely underestimated at its outset”.
News of the tapes began to filter into the German media yesterday. The tapes “show the hubris that the bank managers felt even just before the downfall of their institution,” wrote Spiegel Online, reporting derogatory remarks by Anglo managers.
As finance ministers meet in Brussels for another go at agreeing tighter banking regulation, the atmosphere is unlikely to be helped by the revelations.
German officials said yesterday the revelations would concentrate minds in Brussels on the need to “curb the type of behaviour that led to the financial crisis” by making banks more resilient to shocks without being a burden on taxpayers.
“We must be extremely careful not to set incentives that, far from making banks safer and more solid, will encourage the excesses and short-term calculations that led to the crisis in the first place,” said a finance ministry spokesman.
Dr Michael Meister, economics spokesman for the ruling Christian Democrats (CDU), said Germany was in no mood to allow recapitalisation of banks struggling under past burdens, so-called legacy debt.
“A direct recapitalisation in these cases will, even in the future, be ruled out,” he said. “I don’t see that the situation in Ireland is so terrible that the last rescue [of ESM-funded direct recapitalisation] will come into play. [That] will only apply for future cases.”
German opposition parties were horrified by the tapes. Carsten Schneider, finance spokesman for the opposition Social Democrats (SPD), called for a full inquiry into the affair. "No more taxpayer money can be allowed to rescue deadbeat banks," he said.
