Tánaiste says talks with ECB 'ongoing'

Fianna Fáil spokesman on finance Michael McGrath called for the Government to put aside its current strategy and "be open with the Irish people about what is going on".

"They must explain what they are asking for and what they will do if we do not get it," he said.

The Government postponed last year's €3.1 billion cash payment by issuing a 13-year bond and had floated the idea of replacing the rest of the payments with loans backed by euro zone bailout cash, but have concentrated their efforts on settling the issue with a long-term bond.

European economic and monetary affairs Commissioner Olli Rehn told Reuters that euro zone governments were looking at ways to help Ireland back to full market access that could include extending the maturity of the bailout loans it received in late 2010 or possibly extending a precautionary credit line to Dublin from the euro zone's ESM rescue fund.

The latter option could open the way for the ECB to buy short-term Irish bonds on the secondary market to help bring down its borrowing costs under the ECB's Outright Monetary Transactions policy.

However, a source familiar with ECB thinking said the governing council would rather hold its OMT weapon in reserve as a deterrent and not use it, noting that Irish borrowing costs had already fallen substantially and the spread over German 10-year bonds reflected market assessment of the credit risk.

He also said he did not expect Spain to request a precautionary credit line to trigger ECB intervention this year since its spread too had fallen to a level that reflected credit risk rather than any market premium due to a perceived risk of the euro zone breaking up or Spain exiting.

Additional reporting: Reuters