Irish guarantee under EU competition law investigation as other countries follow lead

The past 24 hours have seen the inevitable movement of money into the Irish banks now protected by the Irish Government’s two year unlimited guarantee of their deposits. This arrangement is now being investigated for breach of European competition law. Nevertheless, the French Government is said to be on the brink of adopting the Irish solution to safeguard their financial system. And the USA administration has just announced an addition to the bail-out deal Senate is to vote on tonight (Congress votes tomorrow). The addition is a guarantee of bank deposits rising from its current $100,000 to $250,000.

Pundits say that people do not need to panic in moving their money but psychologically, the action is defensible in seeking the most obviously secure place for savings. The consensus in financial expertise seems to suggest that, as we suggested last night, Gordon Brown’s raising of the British Government’s deposit guarantee from £35,000 to £50,000 is ‘neither here nor there’, too little to stabilise the savings deposits of British – and Scottish – banks. Moreover – and typical of Brown - there is no date yet set for the implementation of this rise so for the meantime – deposits in UK banks are guaranteed only to £35,000.

Brown’s action may have a sound theoretical basis but this is not the time for theory. It is the moment to understand the need for absolute reassurance as people deal with a profound sense of betrayal by a largely unregulated financial system, seeing their personal financial security collapse around them.