THE Government said yesterday it may not use Europe's bailout fund to pay for the rescue of AIB and Bank of Ireland, despite fighting for over a year to get permission to do so.
The admission came after eurozone finance ministers agreed late on Thursday that the European Stability Mechanism (ESM) could be used to pay for past bailouts "retroactively".
Such payments will be decided on a case-by-case basis, so it is not clear whether Ireland will be allowed to benefit. Any country can stop a decision.
This means that Ireland can apply to the ESM to take on at least part of the cost of the €25bn the State pumped into the two lenders three years ago.
Finance Minister Michael Noonan and Taoiseach Enda Kenny have repeatedly made their case at EU meetings for permission to tap the ESM.
However, speaking in Luxembourg yesterday, Mr Noonan said the Government had yet to decide whether it will try to access the fund or not, and may prefer a trade sale of its shares if possible.
The ESM will not be ready until this time next year and the economic situation may be much improved by that time.
"There's a possibility now that in the future we can retrieve some of that money through the ESM (but) we'll have to examine the text very carefully and see where we'll position our negotiation," he said.
"We also have a situation (that) is not like a year ago. Both banks have forecast they will be in profit next year, and looking at their balance sheets I think the forecasts will be accurate.
"We will have two profitable banks in a growing economy next year and obviously that changes values of banks and it changes the arithmetic.
"I don't want to tie the future of the banks or the banking system solely to the ESM. Next year, the two banks will be operating profitably with practically a monopoly in a growing economy.
"That's valuable and the markets will see it as value there so if we are looking for potential purchasers we may not go down the ESM route, but it's vital that we have the option still in place," the finance minister added.
Mr Noonan was speaking ahead of what was set to be a marathon meeting of EU finance ministers as they seek to hammer out a way to deal with failing banks.
The Bank Recovery and Resolution proposal (BRR) is looking at a range of issues with failing banks, such as whether senior bond holders will be bailed in and what deposits, if any, will be hit in future bank deals.
Mr Noonan, who was chairing the meeting as part of the Irish presidency, said there were still many obstacles to be addressed.
"It looks like there is unanimity that deposits that are guaranteed will not be bailed in, and there is strong support that deposits above €100,000 will not be touched if they belong to ordinary folk and SMEs, but large deposits of large corporations would be (bailed in)," he said.
By late evening ministers had signed off on measures to combat VAT fraud, while it was also confirmed Latvia will join the euro next January 1.
The extension of maturities on EU loans to Ireland and Portugal, which had previously been announced, was formally put into action.
The big decisions on bank resolution had yet to be tackled, though.
However, the EU's economic commissioner Ollie Rehn was hopeful of a deal.
"It is the longest day of the year so there is plenty of time for negotiation yet," he said.