It could be cunning because apparently the guarantee is enticing many British citizens to move their money to Irish banks, thus giving those banks a larger deposit base. This larger deposit base makes them better able to withstand the credit crisis.
It could be reckless because Ireland has a bigger housing bubble than the U.S. did at its peak. Also, deposits in Irish banks are so large compared to the size of the small Irish economy that actually making good on the guarantee would wreck the Irish economy.
It could be both, because Ireland is protecting its banking system, but at a very high risk.
The Economist discusses the Irish bank deposit guarantee and the trouble it is causing in Europe:
A new Irish government guarantee of €400bn (£313bn) to protect 100% of savers' funds in big Irish banks has prompted a backlash in Europe. Worries are particularly acute in London, where there are fears about a flood of money being shifted from British to Irish institutions (Britain's savers have a guarantee of up to £35,000 on their bank deposits). Gordon Brown weighed in on Thursday, urging Dublin to stop aggressive marketing by banks covered by the Irish government guarantee. ...
Despite [French President] Mr Sarkozy's desire to keep EU states from unilaterally increasing their guarantees to savers, Greece has now followed Ireland's lead and upped its backing.
But it would be unfair to blame Ireland alone for the uncoordinated European response the crisis (and far-fetched to seriously suggest that officials dreamt up the guarantee to get a leg up on the neighbours). With profoundly differing ideas about financial regulation and intense fire-fighting now underway at multiple levels of the crisis, government officials from Britain, France, Germany, Italy and beyond are worried first about how to prevent further contagion within their own countries.
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