BANKING GUARANTEE:THE EUROPEAN Commission has moved quickly to sanction the extension of the Government's banking guarantee until the end of June 2011. The commission said the measure was an adequate means to remedy a "serious disturbance" in the economy.

EU competition commissioner Joaquín Almunia said the commission considered the extension to be in line with EU rules.

“The extended measures are well targeted, proportionate and limited in time and scope,” the EU’s executive branch said.

The move comes only seven weeks after the commission prolonged the guarantee scheme until the end of the year and brought short-term corporate deposits within the scope of the extension.

It points to continuing strain on the beneficiaries of the scheme: Allied Irish Banks, Bank of Ireland, Anglo Irish Bank, Irish Life Permanent, Irish Nationwide Building Society and the Educational Building Society.

It also comes amid pressure on shares of the three listed banks, AIB, BofI and ILP.

The Government will extend the bond issuance period under the existing eligible liabilities guarantee scheme until the end of 2011 from the end of 2010. The scheme is not a blanket guarantee but instead guarantees specific issuances of eligible debt securities and deposits, of up to five years, placed during the relevant issuance period.

Minister for Finance Brian Lenihan said the commission’s approval for an extension until June was for “the maximum period permitted for State aid approval” under EU rules on guarantee schemes.

Mr Lenihan said the decision to extend the guarantee followed advice from Central Bank governor Patrick Honohan.

The European Central Bank has endorsed the extension of the scheme.