When Ireland made the unilateral move last week, it surprised EU partners. But Sunday Germany announced that its government would guarantee private bank accounts as EU nations are being forced to confront the fact that their own lenders, as well as U.S. banks, made poor real estate bets, The Washington Post reported.

The newspaper said Irish economists and political leaders are facing a severe recession and have come to realize their problems stem not just from spillover from Wall Street's woes, but from massive, reckless domestic real estate lending as well.

"This didn't fall from the sky. There are people who are up to their necks in profligate and greedy lending," Ruairi Quinn, a senior Irish Labor Party official, told the Post.

"People now look back on the 10 to 15 years leading up to 2006 as the Golden Age," added Geoff Tucker, an economist at the Hooke and MacDonald real estate firm. "Things are different now. There is a huge amount of uncertainty."