DUBLIN - IRISH lawmakers passed a controversial emergency law guaranteeing bank deposits on Thursday, despite protests that the move gives its financial sector a competitive advantage over neighbouring countries.
Britain in particular has argued that the guarantee, covering Ireland's six main banks, is unfair amid fears of a surge in savings from British banks into Irish deposit accounts.
In an almost unprecented all-night session, Ireland's Dail (lower house) passed the legislation giving a two-year blanket guarantee by 124-18 in the early hours, followed by the Senate by 39 votes to five around breakfast time.
The guarantee, estimated to be worth over 400 billion euros (S$813 billion), safeguards retail and commercial deposits, as well as bonds, for two years. It is designed to protect Irish banks amid the global economic turmoil.
It covers Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.
Before being signed into force by President Mary McAleese, which could happen later on Thursday, the Credit Institutions (Financial Support) Bill still needs to be reviewed once by the Dail.
Irish lawmakers have not sat for such a marathon session for three decades, a spokesman said.
On Wednesday the British Bankers' Association (BBA) industry group slammed the Irish guarantee as anti-competitive, while British finance minister Alistair Darling reportedly urged Ireland to include British banks in the arrangement.
'We are taking up with the Irish government its moves to guarantee bank deposits as this has distorted competition,' said the BBA in a statement.
'The extent of the guarantee has clear consequences for firms competing to win retail deposits and, while we support proposals aimed at re-introducing stability to the financial markets, we need fair play for financial institutions across Europe'.
According to British media, it was fear of an exodus of funds from Britain to Ireland that prompted Darling to intervene twice on Wednesday, urging Dublin to extend the guarantee to British banks operating in the republic.
The Irish government shifted some ground late on Wednesday, announcing that non-Irish owned banks with a 'significant' high street presence may be included.
A spokesman for Irish Finance Minister Brian Lenihan said he would 'consider applications to join the guarantee scheme from financial subsidiaries with a significant high street retail presence here.'
But Ms Joan Burton, finance spokesman for the opposition Labour party, warned that whatever the cost of guaranteeing the six original banks, adding further banks 'will clearly extend it significantly'.
'This move threatens to open up a financial Pandora's box and increases further the potential exposure of the Irish taxpayer,' she said.
Irish Prime Minister Brian Cowen earlier defended the move, saying the banks were 'facing an unprecedented situation where there is a credit crunch'.
Eurozone member Ireland, rocked by a property market meltdown and the global credit crunch, has fallen into recession for the first time in 25 years after its economy shrank in the second quarter of 2008, official data said last week.
Irish gross domestic product (GDP) contracted 0.5 per cent in the second quarter of 2008 compared with the previous three-month period when the economy contracted 0.3 per cent.
The 'Celtic Tiger' economy had not experienced a recession - defined as two successive quarters of negative growth - since 1983. -- AFP
