Irish government pledges to cover up to €400 billion ($575 billion) of bank liabilities

[sullivan]

You think $700 billion bailout for a country of 300 million is bad? It works out at approx €2,400 per capita and at least it is a fraction of your GDP!

Now try $575 billion in guarantees in a country with a population of only 4 million! That is $143,750 per capita and double the country's GDP.

Irish Government Guarantees All Bank Deposits
From Reuters/CNBC

Ireland guaranteed all bank deposits on Tuesday in a bid to improve the industry's access to international funds frozen by the global credit crunch.

The pledge, which covers up to 400 billion euros ($575 billion) of liabilities -- more than twice the country's annual gross domestic product -- and includes retail, commercial and interbank deposits, takes effect immediately and expires in September 2010.

The scheme, which also covers certain bonds and other debt instruments, will be provided at a charge to the banks, whose level is still to be determined.

Ireland, hit by the double whammy of the global credit crunch and a domestic property slump, last week became the first euro zone economy to slide into recession this year, abruptly ending more than a decade of its 'Celtic Tiger' boom.

"What we're doing here is guaranteeing the lifeblood of the banking system, the system of lending and borrowing that is essential to successful operation of any banking system," Finance Minister Brian Lenihan said.

"Were liquidity to dry up in the Irish banking system in the weeks ahead the inevitable result would be economic catastrophe for this country." He said the guarantee needed to be enshrined in legislation and might not apply were a foreign bank to take over an Irish bank.

Shares in the country's banks have been some of Europe's hardest hit. On Monday, they suffered their biggest losses in more than two decades although Tuesday's announcement helped to reverse much of those falls.

Shares in Anglo Irish Bank were 59 percent higher by 1331 GMT at 3.6 euros. Allied Irish Banks traded 13.8 percent higher, with Irish Life and Permanent up 23.5 percent and Bank of Ireland 19.9 percent stronger.

That helped the Irish market climb more than 6 percent on a day when world stocks fell to near three-year lows as turmoil following the rejection of a $700 billion U.S. bank rescue package swept from Wall Street to Asia and Europe.

"This should make it easier for Irish banks to obtain funding," said ING credit strategist Maureen Schuller, adding it was a solution other countries should consider.

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Well, that's okay, isn't it? The stock market climbed 6%! Whoopeedo!

The stock performance of banks means something to a small proportion of the population. The cost of the bailout, on the other hand, will have a significant and lasting impact on taxpayer. How on earth can any nation commit two years GDP to prop up usurers?