The State is to spend between €500 and €1 billion recapitalising the credit union sector, Minister for Finance Michael Noonan said today.
He told the Seanad unused funds earmarked for recapitalising the banks would be the basis for the investment.
Mr Noonan said some credit unions were on the verge of failing. Rising arrears has led to the imposition of lending restrictions by the Central Bank.
Mr Noonan reiterated that Ireland's banks were adequately capitalised said Europe now appeared ready to recapitalise banks left exposed by a deepening sovereign debt crisis.
"There seems to be a change of mindset in Europe," he said.
"I hope that a lot will happen over the next couple of weeks because if it doesn't we are facing an unmitigated disaster and I certainly hope that doesn't happen."
The Minister said Ireland would wait for more data on performance of the economy before deciding whether to follow the advice of its European partners and push through additional austerity measures next year or seek to provide some stimulus.
The IMF has told authorities in Dublin to stick to the existing 2012 deficit target of 8.6 per cent of gross domestic product but the European Commission wants them to push harder.
"I don't know yet, it's a judgement call," Michael Noonan said. "We will wait for another month or so.
"The IMF are more Keynesian in their approach. They have been advocating for some time that there should be some element of demand stimulus in Europe," he said.
"What they are saying to us is, 'You have got your economy growing so be cautious about your adjustment, make sure you meet your target but we don't think you need to go further than that because you might lose it on the reduced growth'".
Officials from the troika of lenders at the IMF, the ECB and the EU will arrive in Dublin early next week to review Ireland's progress under its €85 billion bailout deal. Dublin is borrowing €67.5 billion from Washington and European partners and coughing up the remainder itself.
Additional reporting: Reuters