Speculation is growing that other EU member states, in particular Britain and France, could follow in Ireland's footsteps by deciding to guarantee savers' bank deposits.
Newspapers around the world have reported on yesterday's announcement with many suggesting that other nations will now have no choice but to take similar steps to safeguard their banking systems.
Many British newspapers claimed today that UK savers could benefit from the Government's decision to guarantee all savers' deposits, with most reporting that Post Office accounts in Britain are provided by the Bank of Ireland, while AIB and Anglo Irish Bank also operate there.
Will Hutton, writing in the Guardian,said that Britain is dithering and needs its own plan.
"Britain still does not have a comprehensive system of deposit insurance for retail depositors, let alone some temporary guarantee for wholesale depositors as announced yesterday in Ireland - largely because the government has genuflected towards bankers' concern at its expense," said Hutton.
The London Independentreported that the UK government is being called on to fully guarantee savers deposits following yesterday's move by the Irish Government.
Among those calling for steps to be taken, according to the newspaper, are the country’s third biggest political party, the Liberal Democrats, and the Financial Services Consumer Panel, an independent body set up to represent consumers by the Financial Services Authority, the City watchdog,
In the same paper, Jeremy Warner noted that Britain and other EU members are slowly moving towards a decision to guarantee deposits but adds that "only Ireland has so far gone the whole hog and made something that was always implicit legally explicit".
However, he warned: “The potential is there for Ireland's actions to spark a beggar thy neighbour round of similar guarantees. In these markets, money will chase the safest havens. Bank deposits that are guaranteed by the taxpayer take on the characteristics of government bonds.
“Unless everyone else does the same thing, Ireland therefore becomes the safest place in Europe to keep your money. As such, it amounts to a form of unfair, or even illegal, state aid. As it is, there are bound to be concerns that the guarantee applies only to Irish banks, and not foreign-owned deposit-takers in the same jurisdiction.
Mr Warner suggested that Ireland may ensure a chain reaction of similar guarantees across Europe.
“Yet though others may eventually be forced to follow, they won't be keen,” he claimed.
“To them, Ireland looks like a special case. The country is already in recession after the end of a long property boom, and all its major banks are highly exposed to the domestic mortgage market, for which at present there is virtually no funding outside retail deposits."
Meanwhile, the Daily Mailwarned that the two-year unlimited guarantee on all deposits is "expected to cause anger" among the many UK banks operating in the country.
“Ulster Bank, an offshoot of Royal Bank of Scotland, is Ireland's third biggest lender but it is not covered by the new rules. However, since all overseas branches are also covered by the safety net, Irish banks are at a significant advantage to their European rivals,” it said.
The Financial Timesclaimed that yesterday's move "is not so much the proverbial Irish solution to an Irish problem as an Irish solution to what is a global problem".
"Tuesday’s guarantee offered by the Irish government to its six national banks to safeguard €400 billion of deposits and bank debt is causing ructions in Brussels, where there is concern the Irish move shatters any hope of pan-European regulatory response to the turmoil,” the paper said.
The Daily Telegraphdescribed the Government's plan as the most dramatic and comprehensive bank bail-out in Europe since the Scandinavian rescues of the early 1990s" and adds that it "may serve as a model for Britain and other countries that so far have been muddling through from one mishap to another with a mish-mash of ad hoc policies".
BBC News Online noted that the move "has huge ramifications" for Britain. Robert Preston wrote:"Potentially it puts British banks at a massive competitive disadvantage - especially since other European governments are also taking urgent steps to reassure their citizens that their bank deposits are safe."
El Paisdescribed the Irish Government's plan as "a dramatic decision", while in the US, the Wall Street Journalsaid the move was "an extraordinary step" which was "one of the most ambitious measures taken by a government since the [credit crunch] crisis began more than a year ago."
Staying in the US, the LA Timessaid: "One argument against such blanket guarantees is when you insure everything, you insure nothing."
Separately, The Globe and Mailin Canada reported that the bank bailout has boosted Maple bonds because several of the Irish financial institutions covered by the guarantee have issued debt in the Canadian-dollar denominated Maple market.
