Ireland on Thursday announced the nationalisation of the Allied Irish Bank (AIB) by investing as much as €5bn to prop up the country's second-largest lender.

The bank's chairman and managing director have been forced to quit after the government took over.

The move comes a day after mass protests in Dublin's streets against public spending cuts to pay for the bank bailouts, notes the Guardian.

The AIB is the fourth bank to be nationalised in the country which is struggling with the largest fiscal deficit in Europe that is more than 30 per cent of its GDP this year.

The Irish central bank had earlier announced a bill of up to €34bn to bail out the Anglo Irish Bank - which finance minister Brian Lenihan said was too big to be allowed to fail.

According to the New York Times, the decision to nationalise AIB signals the government's acceptance of the fact that the banking problems in Ireland have contaminated the sector as a whole, to such an extent that the state had to step in.