Tánaiste Joan Burton has backed the call by outgoing Central Bank governor Patrick Honohan to burn junior bondholders at the former Anglo Irish Bank.
Ms Burton said the State would use all legal means to ensure junior bondholders at the now defunct lender would not receive payouts.
And her spokesman said she was resolute in her view that so-called subordinated debt holders "should not and will not be paid".
The Tánaiste was reacting to email correspondence between Mr Honohan and a top official in the Department of Finance, published by the Irish Independent, in which the governor said the moral case for ensuring any surplus from the liquidation of IBRC was returned to the taxpayer was "almost unassailable".
Bondholders owed €270m are almost last in line to be paid from the liquidation of more than €21bn worth of assets belonging to the IBRC - the remnants of Anglo Irish Bank and Irish Nationwide Building Society.
But payouts to bondholders would come ahead of any repayment of part of the State's €30bn rescue of the scandal-hit boom-time lender.
Responding to Mr Honohan, department second secretary general Ann Nolan wrote that it wouldn't be legally straightforward to ensure the State recoups some of the €30bn before subordinated debt holders are repaid.
But Ms Burton stressed that the State would fight to ensure no payments were made.
"We will use all the legal means at our disposal to resist any attempt by these holdout junior bondholders to extract any money from the Irish Government," she said.
Finance Minister Michael Noonan said yesterday that the Government would take Mr Honohan's advice "very seriously", but speculated that there may not be any money left for the junior bondholders after other creditors' claims are settled following the liquidation as they are almost last in line to be repaid.
Money must also be set aside for legal cases.
"At the end of the process, in two, three, four years time, the issue of junior bondholders will come up and we'll take Patrick Honohan's advice very seriously if it comes to that," the minister said.
"But there may not be enough money there anyway, because they come at the end of a hierarchy."
In her email response to Mr Honohan, Ms Nolan said the attorney general was examining whether it was possible to have some of the promissory note funds repaid before junior bondholders get their money. A spokesman for Mr Noonan declined to comment on this.
"The process of identifying unsecured creditors has only taken place at the end of May. They have all to be assessed and then we will move on," the spokesman said.
In the emails with Ms Nolan, Professor Honohan said that if the State cannot persuade an Irish lawyer to fight its case, it should engage top US debt lawyer Lee Buchheit.
Mr Buchheit has worked with both the Greek and Icelandic governments.
Mr Honohan said European rules put in place after the financial crisis could help Ireland's case.
Sinn Féin's finance spokesman Pearse Doherty backed Mr Honohan's call.
"Governor Honohan is a member of the ECB Governing Council. To see his concern and opinion dismissed without adequate discussion is unacceptable," Mr Doherty said.
The Donegal TD said that the governor's arguments were "met only with a cynical defeatist attitude from the Department of Finance, presumably taking their lead from the minister."
In her email, Ms Nolan said it was her strong preference that the State would be paid ahead of the bondholders, but she warned that any proposal to alter this would not be legally straightforward.