The Irish government today pledged to guarantee all bank deposits in order to improve bank access to international funds frozen by the global credit crunch.

The guarantee, which covers up to E400bn (£300bn) of liabilities including retail, commercial and interbank deposits, takes effect immediately and expires in September 2010. It covers six major banks - Allied Irish Bank, Bank of Ireland, Anglo Irish Bank, Irish Life and Permanent, Irish Nationwide Building Society and the Educational Building Society.

Ireland, hit by the double whammy of the global credit crunch and a domestic property downturn, last week became the first eurozone economy to slide into recession this year, ending more than a decade of its 'Celtic Tiger' boom.

‘What we're doing here is guaranteeing the lifeblood of the banking system, the system of lending and borrowing that is essential to successful operation of any banking system,’ finance minister Brian Lenihan said.