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Europe gives green light to extending Ireland's bank guarantee

The European Commission has approved the extension of the government bank’s guarantee – for six months longer than needed.

Olli Rehn: the European Commission has today approved a six-month extension to the Irish government's bank guarantee scheme.
Olli Rehn: the European Commission has today approved a six-month extension to the Irish government's bank guarantee scheme.
Image: Mauro Scrobogna/AP

THE EUROPEAN COMMISSION has given its approval to a 12-month extension to the government’s bank guarantee scheme.

The scheme, originally approved by the Commission in November 2009 after its modern incarnation was proposed in October of that year, may now be continued until the end of June 2012.

Commission approval for the guarantee is required because it would otherwise be deemed to give guaranteed banks an unfair advantage in the open banking market.

In a statement issued this lunchtime, the commission said it found “the extension of the measures to be in line with its guidance on state aid to banks during the crisis”.

The extended measures are well targeted, proportionate and limited in time and scope.

The Commission, therefore, concluded that the guarantees are compatible with [...] the Treaty on the Functioning of the EU, that allows to grant aid to remedy a serious disturbance in the economy of a member state.

Both Houses of the Oireachtas voted last month to extend the guarantee by twelve months, though Labour TD Tommy Broughan lost the party whip for his opposition to the move.

The Oireachtas voted to extend the guarantee until the end of December 2012, though the Commission only approves extensions for six months at at a time.

It is understood that the government will be granted permission for a further six-month extension in the middle of next year.

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Gavan Reilly

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