When Ireland decided to guarantee the liabilities of a banking system twice the size of the country’s GDP, it didn’t take long for banks in neighbouring countries to complain about unfair state aid at the first sign of corporate deposits flowing west. European banks were already nervous about being put at a disadvantage by any US government guarantees for bad assets of big banks operating in the US and had begun lobbying hard for a similar European bail-out plan. Amid reports of disagreements among European finance ministries over this, it is easy to imagine a clash between European institutions and national interests exacerbating the uncertainties assailing European banks.
But at...
