Officials in Athens say Greece will follow the Irish lead in guaranteeing all bank deposits.

Governments across Eastern Europe were forced to issue statements yesterday assuring depositors that their banks were safe. Traders said Ukraine was on the brink of a currency crisis.

The Greek move puts fresh pressure on Germany to back the mounting calls for an EU lifeboat fund to shore up Europe's struggling banks.

But Chancellor Angela Merkel warned that there would be no blank cheques for those who get into trouble.

Berlin fears that any such fund is a Trojan horse that could ultimately leave German taxpayers footing the bill for a massive bail-out of southern Europe as the region's booms turn to bust. Key ministers are now frantically trying to stop the idea gaining a serious head of steam.

Pressure has come on other EU member states following the Irish decision to guarantee the deposits and debts of its biggest lenders.

'The whole of Europe will have to do same thing, otherwise Europe will have a split banking system,' said Hans Redeker, currency chief at BNP Paribas. British banks are already facing a haemorrhage of deposits to Irish banks that now enjoy the AAA sovereign rating of the Irish State.

Greece has so far escaped attention as the financial storm breaks over Europe, but the economy is deeply unbalanced. A torrid credit boom has been allowed to run unchecked, leading to a current account deficit of 15% of GDP - the highest in the eurozone.

While property losses are modest so far, Greek banks have run into trouble rolling over short-term debts after the near total closure of Europe's capital markets. The liabilities of the Greek banks are roughly €320bn.

Neelie Kroes, the EU competition commissioner, has said that Ireland's decision to act unilaterally risked a descent into the beggar-thy-neighbour mayhem of the Great Depression.

But David Owen, Europe economist at Dresdner Kleinwort, said Ireland had no choice, given the lightning pace of events on Monday. 'Their banks were going down. No government can let that happen. They did exactly the right thing to ring fence this.'