MINISTER for Finance Michael Noonan was meeting the ECB today in the hope of reaching a deal to put off a €3.1bn Anglo Irish Bank debt.
Mr Noonan has given the strongest signal to date that the Government will be able to avoid paying €3.1bn in cash to Anglo at the end of the month.
The proposed move will delay the payment and give the country financial breathing room.
Mr Noonan said that this could brought about by way of a Government bond -- essentially an IOU --rather than cash.
Ultimately, this would give the Government time to conclude the negotiations with the Troika on the overall cost of the Anglo-Irish Nationwide bailout.
Although critics have branded the move as "kicking the can down the road", it buys time to renegotiate interest rates.
Central Bank Governor Patrick Honohan meets his colleagues on the governing council of the ECB later today.
If he can negotiate a multi-year deal it would improve the chances of avoiding a second bailout.
The Fine Gael/Labour Coalition is due to make the €3.1bn payment at the end of the month to the former Anglo Irish Bank -- now IBRC. It is then supposed to use the funds to reduce its emergency borrowings from the Central Bank -- this is part of the commitment to repay €31bn in promissory notes -- in effect government IOUs -- that it issued at the height of its financial crisis to cover the cost of bailing out its main banks.
Mr Noonan told the Dail last night there had been "developments" with the ECB.
"The discussions with the European authorities on the general issue continue, but we are now negotiating with the EU authorities, and principally with the ECB, on the basis that the €3.06bn cash instalment due from the minister to IBRC on March 31, 2012, under the terms of the IBRC promissory note, could be settled by the delivery of a long-term Irish Government bond," he said. "The details of the arrangement have still to be worked out."
Fianna Fail finance spokesman Michael McGrath said that it is the first real indication of any flexibility on the part of the ECB.
"This is a good first step, an interim measure," he said.
"But I think we need to conclude an overall deal and not just a deal that attracts short term cash benefits."
However Sinn Fein described the move as a "blackmail clause", the condition in the treaty that prevents access to the EU's future bailout fund for those countries which have not ratified it.