The Government has no immediate plans to recapitalise Irish banks, the Tánaiste, Mary Coughlan, told the Dáil today.
"At this moment in time it's not the Government's intention to move towards capitalisation," she said. "I think it's also equally important to say that this matter is constantly under review."
Fine Gael deputy leader and the party's spokesman on finance Richard Bruton raised the matter in the Dáil this morning, saying that over half of small and medium businesses were finding it difficult to raise credit in the form of overdrafts and term loans.
Responding to Mr Bruton's comments, Ms Coughlan ruled out the plan, saying the Government felt it was an "inappropriate mechanism". However, she indicated that the decision was not a final one.
Ms Coughlan's comments have drawn criticism from the Opposition, with Mr Bruton saying that the "wait and see" approach could worsen the current economic crisis.
"The Tánaiste displayed alarming complacency in the Dáil today in the face of clear evidence that more than half of our sound businesses are now finding it difficult to raise finance from the Irish banks," he said.
"Six weeks after issuing a guarantee to cover every bank deposit, the Government still does not seem to have a strategy to keep credit flowing. Without a flow of credit, the current recession will be deeper and longer than it need be.
He said there was little evidence to support what he referred to as Fianna Fáil's belief that Irish banks with solid business models are able to find investors by themselves to put in the necessary reserves.
"The lessons of banking crises in other countries could not be clearer. The longer Government chooses 'to let sleeping dogs lie' and fails to fix an under-capitalised banking system, the greater the contraction in lending and the greater the final cost to both taxpayers and the wider economy," he said.
Mr Bruton said the risk to Irish taxpayers was "manageable" if each financial institution's loan book was properly vetted and the banks were willing to adopt a "sound lending strategy attuned to our economic needs".
