The Government was left red-faced yesterday as revelations of €40m worth of bonuses to bankers emerged on the same day as basic social welfare benefits were cut by €8 a week.
On the backfoot over the payments, Finance Minister Brian Lenihan announced a 90pc tax on future bonuses -- but this won't apply to the AIB payments.
Mr Lenihan said the new tax, similar to the levy brought in by US President Barack Obama, was being introduced, even though bonus schemes were withdrawn.
"That should copper-fasten this matter and put it beyond any doubt whatsoever," he said.
But a government source said: "That it's happening is a disgrace. There is no defending it (the bonuses)."
Mr Lenihan continued to claim "no bonuses have been paid to senior bankers for 2009 and 2010", as the Government stressed that the bonuses were based on previous years and had to be paid on foot of a High Court case.
Fine Gael insisted a punitive 99pc tax could be applied to the €40m bonuses and any further payments.
Party leader Enda Kenny said: "It is an obscenity . . . that you are now in a position that the Irish taxpayer is being asked to fork out every cent for these bonuses when pensioners, the blind, the disabled, the most vulnerable in our society are having to bear the brunt of recklessness and incompetence in Government."
Labour Party leader Eamon Gilmore also condemned the bonuses, contrasting them with the social welfare cuts.
Fine Gael enterprise spokesman Richard Bruton also vowed his party would clamp down on "powerful interest groups who demand excessive pay for their services".
The bonuses also made waves in Brussels. EU commission chief Jose Manuel Barroso has said that any future bonuses for AIB bosses will only be paid on the condition they "contribute to long-term profitability" of the lender.
Mr Barroso told reporters: "Today's decision seems to be from the Irish courts and not from Allied Irish Bank."
Brussels approved a €3.5bn injection for the bank in May last year, when it placed curbs on executives' pay and dividends. But those restrictions don't apply to the case brought to the High Court by a group of bankers seeking the back payment of bonuses for 2008, before the government guarantee was issued.
The EU will have to approve any further public money being pumped into the bank, which Mr Barroso said would be subject to "clear" conditions.
Earlier, a spokeswoman for EU competition chief Joaquin Almunia had indicated that had the bank itself taken the decision to pay out the windfalls, it would have been "slightly bizarre".