Financial crisis - Guarantee legislation

The decision of the European Central Bank, the Bank of England and the US Federal Reserve to cut interest rates is to be warmly welcomed. Other banks have followed suit, including the Bank of China, Bank of Japan, and Swiss National Bank.

The move is a determined attempt to stop the financial crisis, which has led to a serious loss of confidence in financial markets and institutions on a global scale.

The weakening of economic activity has led to a reduction in inflationary pressure. So the conventional financial thinking is that interest rates can be cut to stimulate economic activity and thereby ultimately help stop the slide without the fear of triggering inflation.

The necessary legislation to underwrite €400 billion worth of Irish bank deposits and interbank loans is being delayed until at least the middle of next week. The proposed legislation is as brave as it is unprecedented, but it is important the Government should get it right and not rush it unnecessarily. It must not be a case of acting in haste and repenting at leisure.