THE head of the European Central Bank (ECB) has signalled support for a deal on Ireland's bank debt a day after the International Monetary Fund (IMF) said Europe needs to do more.
Mario Draghi said the powerful Frankfurt-based body would "view positively" any measures that would strip banking debt from a state's balance sheet, after being asked about Ireland.
The Government is hoping to use Europe's permanent bailout pot, the European Stability Mechanism (ESM), to recoup the billions of euro of taxpayers' money put into Bank of Ireland, AIB and Permanent TSB.
The Italian economist stressed it was up to eurozone finance ministers to set out what the ESM can do. But he added: "We view positively any measure that cuts the link between sovereigns and banks."
However, there appeared to be a contradiction in the ECB president's comments after he later stated that the banking crisis should be resolved without using taxpayers' money.
The ESM would be funded by each member state.
"We've said many, many times that . . . we have to be able to resolve banks without using taxpayers' money and without disrupting the payment system," Mr Draghi said.
His remarks come a day after scathing comments from the IMF that EU leaders had failed to deliver on their promise of a bank debt deal for Ireland.
The latest review of Ireland's progress said we were doing enough to get out of the bailout but we risked falling into a new rescue deal.
The international finance body called for the ESM to be used to deal with the €32bn that went into AIB, Bank of Ireland and Permanent TSB. But the move is being strongly resisted by a number of countries including Germany.
Mr Draghi's comments come just weeks after the head of the group of eurozone finance ministers, Jeroen Dijsselbloem, said European taxpayers should not have to pay to bail out banks.
Meanwhile, officials from the Department of Finance yesterday told the Oireachtas Finance Committee the Cyprus situation was different from Ireland.
Aidan Carrigan said: "Our banks are fully recapitalised at this stage. "There is no comparison between Ireland and Cyprus and we need to make that clear."