"The real test of the two Brian's mettle and their political savvy should be measured by the extent to which they can force the banks back into the market"

I wonder what Alistair Darling thought when he read his papers on Wednesday morning. Did Gordon Brown call him and ask how it was the Irish government had, in one stroke, taken an approach to fixing its banking problems that won the support of the most critical banking analysts and media alike? The oracle for all thinking men in Britain, the Times, and its US peer the Wall Street Journal were impressed, as were many of the international broking and investment houses.

It would appear Ireland is making a habit of becoming something of a loner on important economic matters. Frequently its approach rankles with its more power­ful counterparts in Europe and further afield. We are the first Eurozone country to slip into recession and as far as our doubt­ers are concerned we had it coming. Why?

Because of corporation tax rates that gave us an unfair advantage in the battle for foreign direct investment and the recent trend of British companies moving their head offices to our shores, that's why. Now, in the midst of the worst ever financial crisis to face the modern world and just when Ireland appeared to be getting its comeuppance, a piece of what some international comment­ators described as smart financial engineering by the government put our nearest neighbours at consider­able economic disadvantage.

Or so it seemed. The initial PR buzz at home and more important­ly in critical financial markets overseas was that the Irish government had chosen the correct course to deal with the worsen­ing plight of its banks. Of course the Irish banking sector is also populated by big play­ers which are not Irish-owned and which did not fall within the category protected by the minister for finance's intended new legislation.

Within hours the powers that be in Whitehall, Copenhagen and elsewhere would have become active and bleated to Brussels about the unfairness of it all and how the Irish operations of their banks were being unfairly disadvantaged. Twenty-four hours later the predictable noises came from the EU, which must be increasingly irritated by all things Irish.

It is hard to see what the Irish govern­ment could do about this. It is hard to believe that last February anyone in the Treasury gave much thought to the impact on Irish institutions of its decis­ion to nationalise Northern Rock. I doubt Darling was holding off press­ing the button until he chatted with Brian Cowen. So when the call came through to Merrion Street on Wednesday last it must have been tempting to tell the Treasury where to go.

There is a balance to be achieved with this whole initiative. Allowing for the fact it is still only days since the bill was passed and its implications will take time to wash through, it would appear the political judge­ment was correct. The economic argument may indeed have been even more compelling. How could you hope to stimulate economic growth with a deeply troubled banking system? Most, though not all, economic commentators agreed and if, as I did, you took George Lee's downbeat mood on Morning Ireland on the day of the announcement as a positive then it would appear the economic argument was also quite compelling.

It is when you get into the complexity of how this will impact on the financial system that more issues arise. Let's be fair to RTÉ's George Lee. The following day after he talked about the government "gambling with the fruits of all our labours of the past 15 years" he addressed the serious point about bad banks still being bad banks and the prospects that some of the newly protected institutions could still topple over. He is correct.

This is where the approach taken by the government will be severely tested. We must assume, while some may have been in a more perilous state than others, the government did not take this action simply to protect any individual financial institution or institutions. They acted because they believed, given the pressure a number of the banks were under, there was a very real danger they might fail and the ramifications for our economy of such a scenario would have been horrendous.

They were right. However, now they need to do the follow up. They need to impose heavy charges, in the most trans­parent and painful manner possible, on those institutions which have to call on the government's support. And the more often they come with the hand out or the greater the demands the higher the charge should be. Equally, any income raised should benefit taxpayers in a manner clear to all.

They need to appoint their own people with the relevant experience and "bottle" to critical positions within these institutions. The regulatory system needs to function like never before (which may mean some fresh blood in the regulator's office) and the environment for those banks where the dependency on the state is greatest should be tough and unrelenting.

Some of the other issues like pay and conditions of executives have a PR benefit but are much less important. There is one other important consideration. For 12 months the banks in Ireland, all of them, have been telling people they have no money. They have, in effect, been closed for lending for the best part of a year. The real test of the two Brian's mettle and their political savvy should be measured by the extent to which they can force them back into the market so prudent and sensible lending can resume. Without this the ultimate benefit of the intervention – economic stimulation – will have been lost.