CENTRAL Bank governor Patrick Honohan has hinted at details of a draft deal on the Anglo Irish promissory notes which "will be very advantageous to Ireland".
Professor Honohan suggested that the core of the deal could be a longer repayment period on the punishing multi-billion euro debt, with low interest rates.
"While it won't change the debt on day one, it will allow a slower, better path to the debt going forward," he told the Oireachtas Finance Committee.
The Government, which holds the presidency of the EU for the next six months, has launched a huge diplomatic offensive to get some easing of the €31bn debt burden incurred in saving Anglo Irish Bank, now called the Irish Bank Resolution Corporation.
Under the terms of the borrowing from the ECB, €3bn is due for repayment in March. The ECB has been reluctant to have the terms of a central bank loan changed, and believes any writedown of the debt would be illegal.
Prof Honohan, who sits on the ECB Governing Council, told TDs and senators that there would be no full write-down of the promissory note debt, but signalled that he had been involved in drawing up the terms of a proposed deal.
"It definitely will be very advantageous to Ireland," Prof Honohan said.
"Any transaction that involves lengthening of maturities could end up adding lots more years of interest, but if those interest rates are sufficiently low, then that is also advantageous."
The Government has suggested that the repayments could be spread over 40 years rather than 10, and will be looking for a big reduction in the interest rates being charged at present.
However, Prof Honohan warned against over-interpreting his remarks that a deal was "done and dusted". He said a solution would be "novel" and "challenging" and said negotiations had been taking place with European leaders.
"Using our knowledge of central banking law and practice, we have been working carefully to build understanding and confidence around a set of proposed transactions designed to deliver for Ireland, while not taking other decision-makers too far out of their comfort zone," he said.
"The ECB is an organisation that seeks to proceed as far as possible by consensus, and it is not surprising that this work has been taking quite a while.
"In fact, what we have designed is, I believe, largely in the interests of the euro system as a whole."
Prof Honohan said there was considerable goodwill from all involved in the discussions, but said it had not been easy to find a "generally acceptable solution".
Asked about the implications of defaulting on the debt, Prof Honohan said the ECB could make matters "uncomfortable" for Ireland. "It would be taken very, very badly, not only by the ECB but by the wider system, international markets. They would say what on earth are they doing in Ireland? Are they not paying their debts?
"If you wanted to go through it blow, by blow, the blows would be unpleasant." Prof Honohan also agreed that it was credible to say that the State could exit the bailout this year.