THE dramatic deal on Ireland's bank debt, secured yesterday by Taoiseach Enda Kenny, could pave the way for a major upturn in the economy.
However, a key issue on how the €64bn will ultimately be repaid has still to be resolved.
A major plank of any deal would focus on pushing out the the repayment of bank debt over a period of 35 to 40 years - something the Government has repeatedly sought.
The current repayment period is 20 years but a longer timespan would dramatically ease the burden on taxpayers.
Mr Kenny and Finance Minister Michael Noonan last night stressed that despite the historic deal there was no scope to ease the upcoming Budget.
This is because, leaving aside our bank debt, the country continues to spend more than it earns from taxation.
Stock markets rose across the world yesterday as news of the deal emerged. Ireland's cost of borrowing on the international financial markets fell 60 basis points to 6.5pc -- the biggest one-day drop in almost a year and the lowest level since the country was bailed out in 2010.
The Government is now expected to test investor appetite for Irish bonds and try to borrow short-term money on the international markets within weeks.
If successful, the Government would then try to borrow more long-term money -- such as 10-year money. This is key to Ireland being able to stand on its own feet and thereby avoid a second bailout.
Speaking at a conference on the economy in Dublin yesterday, Central Bank Governor Professor Patrick Honohan said the deal would play a part in the country's recovery.
"If financial markets and growth conditions in Europe can indeed be stabilised; if financing conditions for Ireland can be improved; and if restraint remains the policy watchword at home, the corner can soon be turned," he said.
But major questions remain around who will now pick up the debt for Ireland, how much the deal will be worth and how the new arrangement will come about. The deal is expected to be applied retrospectively to some or all of Ireland's bank debt.
Some analysts are suggesting that the deal could incorporate all €64bn worth of funding that was put into the banks by the taxpayer and shift this debt off the State's books.
Mr Noonan will have to tease out the detail of the agreement over the coming months. Government officials are putting proposals together, with one option being to set up a NAMA-like body to house all the debt.
The new body would buy up all the state-owned shares of the banks, using money from the EU bailout funds.
The effect would be to manage all the bank debt under one arrangement and take it off the State's books entirely, making it more attractive for the markets to lend money to Ireland.
But it is still unclear if the deal will cover the debt arising from the former Anglo Irish Bank, cash from the National Pension Reserve Fund or other bank-recapitalisation measures.
Another strong possibility is entirely scrapping the controversial and expensive IOU from the collapse of Anglo -- known as the promissory notes -- and restructuring it in another type of longer-term loan.
Mr Kenny said the deal was a "seismic shift" in EU policy as he had managed to get Ireland specifically mentioned in a deal cut to calm the markets by bailing out banks in Spain and Italy.
The deal will allow the new EU bailout fund, the European Stability Mechanism, to put money directly into banks, rather than forcing countries to borrow the money for their banking system.
After more than 13 hours of talks in Brussels that ended at 4.30am, the leaders of the 17 eurozone countries also agreed to specifically examine the debts on the Irish banks with a view to "further improving the sustainability" of the bailout.
Mr Kenny said: "The fundamental principle of the ESM providing the funding to break the link between the sovereign and the bank has now been established. The fact that Ireland was written into these conclusions speaks for itself."
Mr Noonan had initially said yesterday that between €30bn and €40bn of banking debt could be transferred away from the State's balance sheets, but he later backed off these figures. He also confirmed that the deal would not lead to any debt writedown for Ireland.
But the Taoiseach said it did not mean the Government could move away from the terms of the bailout, adding: "This decision here will not impact upon the Budget which Mr Noonan will deliver to the Dail in December."