European financial leaders have fast forwarded attempts to hammer out a deal on extending repayment dates for Irish loans to avoid contagion and now want an agreement this weekend.
Both Dutch Finance Minister Jeroen Dijsselbloem and European Union Economic and Monetary Commissioner Olli Rehn said yesterday that a deal needs to be reached at a two-day meeting which starts tomorrow.
Their comments contradict previous statements from Finance Minister Michael Noonan and the German government who both said a deal to extend repayments by an average of seven years was not likely until next month.
While an early deal would be good for the Irish Government, there will be disappointment here that the German finance ministry said yesterday morning that the Berlin parliament must vote on any changes.
The German parliament, or Bundestag, has been examining the confidential troika proposals to extend Irish and Portuguese debts by an average of seven years.
The report, leaked in Berlin, says the troika wants a speedy decision. "Given the current volatility in the markets, quick implementation is recommended to maximise benefits in shielding Ireland and Portugal from possible contagion effects." The report adds that "resolving the issue now allows the authorities to plan and communicate issuance requirements to the market with more certainty".
The Irish Government had hoped that a seven-year extension would be small enough to avoid debates in parliaments around Europe on the need for extensions. Any country can veto the plan.
News that German politicians must approve the extension of loan maturities means that Ireland's bailout faces the risk of becoming an election issue as Germans go to the polls in the autumn to decide on Chancellor Angela Merkel's political future.
A spokesman for German Finance Minister Wolfgang Schaueble said yesterday that the issue would be discussed tomorrow but warned that it was too early to make a decision on Ireland's plan to return to the bond markets later this year.
The German public is weary of bailouts and many ordinary Germans have lost faith in the ability of countries which have received bailouts to recover from the crisis. The recent bailout of Cyprus and the probable bailout of Slovenia in the next few weeks means that bailouts have become unpopular with Germans.
Ireland's ambassador to Germany, Dan Mulhall, spoke at a public meeting in Hamburg on Monday about how countries such as Ireland can beat the financial crisis as Ireland seeks to drum up support among Germans.
The latest setback for the Government here came as a new European Commission report warned that Spain and Slovenia have banking and labour-market problems that are causing imbalances in their economies, after an in-depth review of 13 European Union countries designed to stop trouble in individual states becoming a wider problem.
The early warning system, called the macroeconomic imbalances procedure, was set up after problems in Greece, Ireland and Portugal triggered the eurozone sovereign debt crisis.
"In Spain and Slovenia, imbalances can be considered excessive," the Commission said, mentioning problems with high deficits and debt, imbalances in the banking system and the structure of the labour market.
"Urgent policy action is needed to halt the rapid build-up of these imbalances and to manage their unwinding," the Commission added.