Yes Minister

Given the focus on Taoiseach Bertie Ahern's activities as Minister for Finance in the early 1990s, it's worth looking back at one well-documented episode from this period: the devaluation of the (Irish) pound in 1993. The potential for a devaluation had been brewing since the sterling crisis in 1992. Bertie and the central bank had strenuously resisted devaluation pressures that followed from Black Wednesday, and by the end of 1992 they seemed to have seen off the crisis. This central bank article takes up the story:

Exchange controls were terminated on schedule at the beginning of January 1993 and there was relief that no immediate outflows ensued. Pressure, however, emerged from a different source. The Financial Times, on 6 January 1993, interpreted a statement attributed to the Minister for Finance (i.e. Bertie), to the effect that:

"I said I was prepared to hold the line until the end of the year. That has now passed. If the system does not correct itself . . . the pressures on industry are something that cannot be lived with indefinitely"

as an indication that the defence of the Irish pound might soon be abandoned. This unleashed a wave of speculation and over the following days there were substantial outflows. When sterling weakened later in the month, following an unexpected cut in UK official interest rates, the pressure became unsustainable. The Irish authorities reluctantly decided on a downward realignment of 10 per cent in the Irish pound’s bilateral central rates against other ERM currencies on 30 January.

There was a second Exchange Rate Mechanism crisis in August 1993, but this was dealt with by widening the bands rather than explicit devaluations, and so had fewer direct implications for the pound.

Anyway, the point of all this is not to recall the glorious period when Private Eye awarded its coveted Bore of the Year to the ERM of the EMS for 2 straight years, but to observe that 1993 was a, shall we say, exciting, time to engage in a little currency speculation (punt sterling and punt-deutschemark would have been particularly attractive) and certainly hearing a few words from the man at the steering wheel during this period was a valuable proposition.

UPDATE 4 DECEMBER: Just for future reference, and possibly unrelated to the above, this Financial Times article from 2nd December says --

JP McManus, a former bookmaker, reportedly made his first million betting on the Irish pound leaving the European Exchange Rate Mechanism

It doesn't specify which departure.

FINAL UPDATE 3 MAY 2007: A snippet from the Irish election campaign trail with Bertie (Irish Times, subs. req'd) --

In the face of one [question], which probed his relationship with NCB Stockbroking executive Padraic O'Connor, Mr Ahern refused to answer and remained silent for a number of seconds.

O'Connor (bio) was an adviser to Bertie during the exchange rate crises.*

[reference]* Mr Ahern said he had regular contact with Mr O'Connor in 1993 as he was providing advice to him in his role as minister for finance.

ONE MORE UPDATE SEP 26 2007: Here's an interesting Dail exchange which concerns Bertie's allegedly passive attitude to the punt devaluation and here's a description of the economic environment right before the devaluation.

FINAL UPDATE 29 NOVEMBER 2007: The O'Connor-Ahern link is now very much in the news with O'Connor's mysterious 5000 pound donation to Bertie; O'Connor says it was to his constituency operation but Bertie and Des Richardson say that it was part of Bertie's personal "dig-out". Here's a Sunday Business Post article from about the same time as we wrote this post exploring the conflict-of-interest problem that Bertie had in his dealings with O'Connor.

HISTORICAL FOOTNOTE 1 FEB 2010: The Irish Times goes down memory lane, given the anniversary. Note that Bertie knew for a full week prior to devaluation that it was coming.