European leaders fail to agree on a common strategy for the financial crisis

The potential total cost of the proposal will amount to 420 billion, around five times Irelands GDP, and the taxpayer will have to foot the bill.

The announcement came on the back of a number of banks collapsing across EuropeBradford and Bingley in Britain, Hypo Real Estate in Germany and Fortis in Belgium, to mention only the most prominent. The impact of the turmoil in Europe had been felt particularly on the Irish stock market, with shares plummeting on September 29. Anglo Irish Bank, one of the largest financial institutions, was down 46 percent, while Bank of Ireland and the Allied Irish bank also suffered double digit decreases.

The threat of an Irish bank being the next to go under had the government taken no action was very real. Announcing the decision to guarantee all deposits, the government stated that it has decided to put in place with immediate effect a guarantee arrangement to safeguard all deposits (retail, commercial, institutional and interbank,) covered bonds, senior debt and dated subordinated debt (lower tier II,) with the following banks: Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society ... It has done so following advice from the Governor of the Central Bank and the Financial Regulator about the impact of the recent international market turmoil on the Irish Banking system.