Irish government steps in to save its own banking system
They could not do it in the US, they keep talking about it in the UK but the Irish government has taken the bold step of guaranteeing the debts and deposits of the country's six largest financial institutions. The move, which has given a massive lift to the sector after weeks of concern, will cost around $700 billion in its entirety but the chances are that the vote of confidence will be enough and very little, if any, tax payer's money will be at risk. So how can Ireland do this but not the US or the UK?
The setup of the Irish financial community is very different to that of other countries around the world as they actually have very limited exposure to the US sub-prime market and other so called toxic investments. The big problem over the last few days, and something which was forecast to last some time, was the stalling of the money markets taking away vital liquidity from the Irish institutions.
This vote of confidence by the government has given the sector a shot in the arm and shares rebounded sharply today. However, don't expect an overnight upturn as the Irish economy has actually slipped into a technical recession of late, but at least after the government move the financial giants will stand a fighting chance of trading their way out of the predicament.
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