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EU approves six-month extension of Ireland's bank guarantee

The approval is seen as routine and may be the last extension, with the possibility of a withdrawal early next year.

European economics commissioner Olli Rehn: The European Commission has today approved a six-month extension for Ireland's bank guarantee.
European economics commissioner Olli Rehn: The European Commission has today approved a six-month extension for Ireland's bank guarantee.
Image: Geert Vanden Wijngaert/AP

THE EUROPEAN COMMISSION has formally approved a six-month extension of Ireland’s bank guarantee.

The decision, announced this morning, allows Ireland to extend the guarantee until the end of June 2013.

The Dáil had formally agreed last month to extend the guarantee until the end of 2013, but it is routine for the Commission only to approve extensions for six months at a time.

European approval for the guarantee is needed because a guarantee would otherwise be seen as giving Irish banks a competitive advantage over their rivals in another countries.

The extension granted today could be the last one sought for the scheme, which was introduced in 2009 as a successor to a previous year-long guarantee, and extended continually since.

Speaking when the Dáil approved the year-long extension last month, junior finance minister Brian Hayes said it was possible that Ireland could reach agreement with the Troika – of which the European Commission is one arm – to end the guarantee in the first half of 2013 as part of Ireland’s overall emergence from the bailout programme.

Hayes said the Dáil would be given adequate notice of any possible withdrawal of the guarantee scheme, and a full opportunity to debate its ramifications.

Ireland has committed a total of €64.1 billion to its banking sector since the original guarantee was introduced in 2008, taking full or majority stakes in five of the six banks which were covered by it.

Read: Banks repay €3.3 billion in fees from State guarantee schemes

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Gavan Reilly

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