Ireland’s guarantee: how does the rest of Europe respond?

Slugger contributors grasped the implications straight away, you clever lot. While Ireland has won admiration from savers and investors for jumping the gun with its bold guarantee plan, in the financial markets and political comment, it took a while – a few hours at least – for the penny (or rather the cent) to drop. Ireland is setting the pace and other countries are worried about the destabilising effect of the Irish move. On the whole opinion seems to be settling on treating Ireland as a special case. But the EU institutions may not be content to leave it there, as Slugger contributors anticipated and as John Murray Brown reports in the FT. “Irish solution is not an answer EU wants. It is not so much the proverbial Irish solution to an Irish problem as an Irish solution to what is a global problem”. Dublin is posing big questions for the rest of Europe, and a summit of the big players is planned for Saturday. Might Ireland be instructed to go back on the guarantee on EU competition grounds? Surely not, if other countries do something similar. In the heel of the hunt, the high politics of this are simple. Any attempt to punish Ireland seriously with a huge fine or some such would put paid to Ireland’s strained love affair with Europe. They could say goodbye to any hope of ratifying the Lisbon Treaty. That’s a crisis Europe could do without, now more than ever.

The Irish precedent puts pressure on Britain to match Ireland if the eventual American bailout doesn’t do the trick quickly. Gordon Brown and the Bank of England are operating with typical caution on a case-by-case basis, with the survival of the Lloyds TBS take-over of HBos providing the acid test. So far the line seems to be holding.

Adds As we expected the EU Commission is now “in close contact” with the Irish government; the French are thinking of following suit and British banks are “seeking urgent clarification” from the British government about what the Irish guarantees means for them. On the BBC Radio 4 ‘s World at One Charlie McCreevy, Ireland’s EU Commissioner defended the Irish move, saying it wasn’t made lightly and created a level playing field with Britain, after Irish savers had moved into Northern Rock after it had been nationalised.

Adds 2 Only a week ago, I thought the great advocate of state intervention Will Hutton was overdoing it. Now he seems very wise with his proposal for mortgage securities, a European banking regime and his slashing critique of Cameron’s regulatory plan. And what possible relevance has a European referendum to anything? Charlie McCreevy’s and Viviane Reding’s outline of a European regulatory regime suggests that Ireland will not be singled out for censure.