Euro zone finance ministers agreed tonight to lay the groundwork for bailing out Ireland's banking sector with the IMF, but said Dublin had to decide itself whether to request the aid.
Eurogroup chairman Jean-Claude Juncker said the European Commission, European Central Bank and International Monetary Fund would hold talks with Ireland over the bailout.
Mr Juncker, who chaired today's talks, vowed to protect the stability of the euro zone if necessary.
"The discussions that will take place between Ireland and the Commission and the ECB and the IMF will enable us to have at our disposal all the elements and instruments we need were Ireland to make a request for assistance to the EU, the IMF and the Eurogroup," he told a news conference.
"We confirm that we will take action as the Eurogroup ... in a determined and coordinated manner to safeguard the financial stability of the euro area if that is needed," said Mr Juncker.
He said the means were available to help Dublin "were Ireland to make a request for assistance to the EU, the IMF and the Eurogroup".
EU economic and monetary affairs commissioner Olli Rehn confirmed this afternoon that the European Commission was discussing a solution to Ireland's banking problems with the IMF, ECB and Irish officials.
"The real problems are in the banking sector," not with the [Irish] Government, "but these are connected," he said. "We have a very strong focus on the banking sector," Mr Rehn said.
Speaking this evening Mr Rehn said he expected talks to intensify and move to Dublin.
Brian Lenihan is reported to have told his European counterparts at tonight's meeting that he has no mandate to negotiate a financial bailout
Earlier today, German finance minister Wolfgang Schaeuble said his government would not urge Ireland to seek aid from the EU bailout fund as EU countries should not prescribe to each other what to do amid the sovereign debt crisis. He was speaking in Brussels.
French finance minister Christine Lagarde said that if Ireland requests financial assistance from the European Union it will be provided. "If Ireland needs help, we will give help," said Ms Lagarde.
Taoiseach Brian Cowen said this evening the Government must find a "credible, efficient and workable solution" to its budgetary problems that "would provide assurance to the financial markets and restore confidence and stability in the Irish economy."
Speaking in the Dáil, Mr Cowen reiterated that Ireland had made no application for external support and said there had been some "ill-informed and inaccurate" speculation about the Government seeking a bailout in recent days.
"Given the current market conditions, there have been on-going contacts at official level with our international partners," he said.
"The Department of Finance is continuously in contact with these bodies. The engagement has been particularly intense in the run up to the budget and the four-year plan."
Mr Cowen said there was no doubt that financial markets had been extremely volatile over recent weeks and that the State needs to provide them with a level of reassurance.
"This is not an insurmountable challenge and, through working together with our partners in a calm and rational manner, we can resolve these issues and underpin financial stability in the medium and longer term," he said. "It is in all of our interests that we find a credible, efficient and above all workable solution that will provide assurance to the markets and thereby restore confidence and stability."
Elsewhere, Minister of State for Europe Dick Roche said that Europe should not panic about Ireland needing a bailout as there is no need for the State to trigger international support mechanisms.
Mr Roche said reports Ireland had applied for assistance were just speculation and said he hoped there would be “more logic” in discussions about Irish finances following tonight's meeting in Brussels.
Mr Roche told BBC Radio 4 that “there is no reason why” Ireland should trigger an “IMF or EU-type bailout”.
“There is a problem with liquidity in banks, but I don’t think the appropriate response to that would be for European finance ministers to panic,” he said.
EU president Herman Van Rompuy said he was confident Europe would overcome its debt crisis.
"We are in a survival crisis," he said at a conference in Brussels. "If we don't survive with the euro zone we will not survive with the European Union."
European Central Bank vice-president Vitor Constancio said Ireland had not yet asked for financial aid and that if it did so the move would not necessarily force other countries such as Portugal or Spain to follow suit.
Mr Constancio said it was up to Ireland to ask for aid if it believed it would help to stabilise financial markets.
Asked whether Ireland could simply use the EU's €60 billion European Financial Stability Mechanism rather than the €440 billion European Financial Stability Fund, he said: "It could be used as a starting point . . . but the way it is seen is that it is part of a package."
Additional reporting: Agencies