Kenny asked to explain debt talks

The Government has come under pressure to provide clarity on what progress, if any, is being made in seeking a deal to reduce the burden of bank debt on taxpayers.

The Taoiseach told the Dáil that the banking crisis will be on the agenda at the next gathering of EU leaders later this month, but that there will be “serious reflection on it before the end of June”.

Despite demands during leaders’ questions, Enda Kenny did not reveal full details of the response from German chancellor, Angela Merkel, to his pleas for a banking resolution during a telephone conversation last Friday.

Mr Kenny said he will write to all leaders across the EU telling them the “banking problem in the eurozone must now be dealt with, and dealt with politically”.

He said he was happy that Europe is having a proper debate on the question of a separation of the sovereign from the bank debt.

The Government hopes any moves to have Spanish banks rescued by the European Stability Mechanism (ESM) could provide a template for other countries, including Ireland.

This could result in the €43 billion already pumped into the Irish banking system being removed from state debt. But it appears that the move could be opposed by Germany — the biggest contributor to the €500bn ESM fund.

Mr Kenny said that he “happened to be one of the first to make the point, in Dublin Castle some weeks ago, regarding the possibility of licensing the ESM for direct injection into the banking situation”.

He said he also raised the possibility at the European Council meeting on growth measures last month.

Mr Kenny said Ms Merkel “commended the Irish people for the decision that they made” in last week’s referendum. She said there were a number of issues to be settled including French, Greek elections and an assessment of Spanish banks and “pointed out that we have a euro summit meeting in June”.

He said but did not give any more detail of what she said on the banking issue.

When Fianna Fáil leader, Micheál Martin, pressed the Taoiseach, Mr Kenny replied: “If you come into this House with an understanding that something as complex as this is going to be sorted out by words over the telephone, then you are very far removed from the reality of what we face here.”