Stress Tests On Irish Banks Due This Week

The results of stress tests on Irish banks are due to be published later this week, and should give a clearer picture of the massive debt mountain that is facing Ireland.

The tests are expected to show that the four biggest banks - Bank of Ireland, Allied Irish Bank, Irish Life and Permanent and the Educational Building Society - need between €15-25bn in extra capital.

€10bn of this has already been earmarked but the last government postponed the planned injection of cash during the recent election.

The capitalization requirements are greater than expected when the IMF/EU bailout fund was agreed in November, but smaller than some analysts have feared.

The European Central Bank is already working on a new plan to keep the Irish banks afloat in the medium term.

A new €60bn fund will replace the emergency fund which is currently financing day-to-day operations of Irish banks.

The new scheme will come with very severe conditions attached, including the right to withdraw support if the government doesn't execute a bank restructuring plan.

The developments come as the Irish government continues to lobby for a relaxation of the terms of the bailout package.

An EU summit on Friday put off making a decision on the Irish interest rate - the agenda for the leaders' meeting was changed at the last minute after the Portuguese Prime Minister resigned over his government's failure to pass the latest austerity measures.

Taoiseach Enda Kenny said he is pushing for a cut in the interest rate.

"What we've been saying for some time is that the package needs to be adjusted - in terms of the interest rate, and in respect of the costs of the banking structure that's associated with it, and that's where the focus of discussion will be when the outcome of the stress tests become known," he said.