Minister for Finance Brian Lenihan has firmly rejected as "unthinkable" a suggestion by the Financial Times that Ireland should default on some bank debts.
Responding to an editorial suggesting such a course of action Mr Lenihan said he had no intention of following the advice. "I do no propose that the country becomes an experiment for default strategy," he said.
He said that that option of default, although available, was never pursued in the United Kingdom, with troubled banks such as Northern Rock and Bradford and Bingley.
He also argued that the large amount of senior debt in Ireland made burden-sharing difficult. He said a default on senior debt at Anglo Irish Bank was "unthinkable."
Mr Lenihan was appearing before the joint committee on finance which was discussing the Government's strategy on Anglo Irish Bank, which was nationalised in early 2009 and may ultimately have cumulative debts of €25 billion or more.
Under persistent questioning from Labour finance spokeswoman Joan Burton and by Fine Gael's Kieran O'Donnell, Mr Lenihan disclosed that Anglo had senior debt of some €4.2 billion and junior or subordinated debt of almost €2.5 billion on its books, as of early this week.
All such bonds were covered under the Government bank guarantee introduced in September 2008, parts of which will not be renewed after September 30th.
The chairman of the committee Michael Ahern (Fianna Fáil) suspended the sitting for five minutes after Ms Burton refused to give way to other speakers and persisted in questioning the minister on Anglo's debts.
He said the Government would be laying a motion before the Oireachtas when it resumes next week dealing with the extension of parts of the guarantee from its expiry date on September 30th until December.
A clear statement on how the Government will deal with the €2.5 billion of subordinated debt at Anglo will be made once the bank guarantee comes to an end on September 30th, he said. His comments were taken to suggest that senior debt will not be affected.
The Minister also said that the assessment of the Central Bank and the Financial Regulator on the capital requirement of Anglo Irish Bank would be announced in early October.
He agreed with the Fianna Fail TD Michael McGrath that the large bank debts and the manner in which promissory notes are dealt with by Eurostat would mean that there would be a spike in Ireland's deficit in 2010.
He would not confirm Mr McGrath's suggestion that the deficit could be as high as 24 per cent of General Government Balance in 2010, before falling in 2011.
"The size of the spike will turn on the financial assessment of the Central Bank and Financial Regulator for the capital needs of the split Anglo in the future and it s impact on the promissory note," he said.
Ms Burton alleged that he had no clear strategy for Anglo and that policy on dealing with the troubled nationalised bank had been drifting since April.
"For the sake of people in the country can you level with us about what you are going to do," she said.
She also claimed that the proposal to create a funding bank and asset recovery bank to replace Anglo was merely a "figleaf" to save his reputation.
"We have to stop that," responded Mr Lenihan. "The situation in the country is too serous for that type of rhetoric."
Ms Burton then contended: "When are you going to exit the Anglo nightmare and give people in this country some hope that we are getting out of this quagmire?
"Tell us what you are going to do cut that shilly shallying that we are going to run for another month."
Mr Lenihan said that splitting of the bank was not a fig leaf but a precise plan and also a resolution regime that had been recommended by the Governor of the Central Bank Professor Patrick Honohan.
Under later questioning from Ms Burton about the apparent ease with which developers and bankers who borrowed money from Anglo and Irish Nationwide were able to base themselves abroad, Mr Lenihan said that the country does not have exit controls.
Ms Burton said her constituents wanted to know where all the borrowed money has gone and whether the developers were taking money abroad. She said they had moved to the UK, the United States and to Switerland.
Mr Lenihan said that the authorities were proceeding to take action against some of the individuals involved.
The Minister also dismissed the suggestion by the general secretary of the Irish Congress of Trade Unions David Begg that readjustment of the deficit should be done over a longer period of time.
He said Mr Begg's argument to extend the correction to 2017 and not 2014 was "a very unrealistic strategy. It would mean that we would have very little credibility in relation to our determination in tacking our problems," he asserted.