THE European Commission has approved another extension to the bank guarantee scheme from December 31 to June 30.
"The prolonged measure is well-targeted, proportionate and limited in time and scope," the Commission said yesterday.
Under the scheme, the Government guarantees customer deposits of over €100,000 that are placed with the Irish-covered banks.
The scheme also covers debts of the banks unless, like the latest bond deals of Bank of Ireland or AIB, they are explicitly excluded.
The scheme must be extended every six months or it lapses. Even if it does lapse, smaller customer deposits of less than €100,000 held in a bank would be protected. The insurance bill for the scheme is €1bn and has been blamed for preventing banks from returning to profit.
AIB paid out €465m last year to take part in the scheme. Bank of Ireland paid almost €450m.
Moody's Analytics said, meanwhile, that the European economy is likely to stagnate through most of 2013 but added that "reasons for cautious optimism are emerging".
It said policymakers from the EU and European Central Bank have committed themselves to keeping the currency union together and a "rough political consensus is growing that fiscal consolidation requires that austerity be imposed more gradually over time".
Moody's Analytics added that austerity and reform has given Ireland "additional fiscal space" or room for debt to rise before it reaches crisis levels.
"Countries such as Greece and Italy ran out of fiscal space some time ago, but Ireland, which began fiscal tightening early, has recently had its fiscal space turn positive," the report said.
Bond yields fell yesterday following the news and Finance Minister Michael Noonan's comments that repayment of the €3.1bn promissory note is unlikely because some sort of deal will be reached.
Mr Noonan reiterated that a deal on the Anglo promissory note was "likely" before the end of March but did not follow in Energy Minister Pat Rabbitte's footsteps and declare that the loan would not be repaid.
"Because a deal is likely, the Government is unlikely to pay," Mr Noonan said in Brussels as he headed into a meeting of finance ministers.
"I've said on a number of occasions that the political deadline on us is March 31 when the next payment is due, and I have also said that it would be very difficult for Ireland to pay the money on that date, so we're working towards a deal and we hope we get a deal," he said.
The commission's decision to extend the four-year-old bank guarantee scheme means it will remain in place until the end of June 2013, covering next year's bank "stress tests".