Eurozone finance ministers will on Monday take the first steps towards addressing if and how the permanent EU bailout fund might be able to directly recapitalise banks, including the issue of legacy bank debt.
It comes in the wake of a Financial Times report that claimed that officials were considering requiring countries seeking European Stability Mechanism support for legacy bank debt, such as Ireland, to contribute to the bank support themselves.
A spokesman for the Department of Finance declined to comment on the report.
Experts from finance ministries across the eurozone have already been working on the issue of the direct recapitalisation of banks since the June summit, at which leaders from single currency member states pledged to break the "vicious circle" between sovereign and bank debt.
Monday's eurogroup meeting, at which Minister for Finance Michael Noonan will be present, will hold the first political discussion on the matter.
The question of whether historical bank debt will be covered by the ESM has caused division and some confusion within the eurozone since last June.
At a summit of EU leaders in December it was agreed that clarity should be established before the end of June on the definition of legacy bank debt.
That followed an apparent rejection of legacy debt by German Chancellor Angela Merkel at a summit in October, followed swiftly by a joint communiqué by Chancellor Merkel and the Taoiseach that Ireland was a "special case".
Earlier in September, the finance ministers of German, Finland, the Netherlands and Austria appeared to rule out the use of the ESM for addressing legacy bank debt.
The Financial Times reported yesterday that a European Commission paper, circulated among eurozone finance ministries, had suggested that countries that wanted help for their banks via the ESM fund would have to "co-invest" in the support, or indemnify the ESM against any future losses.
The European Commission has since said that "no conclusion has yet been reached" on the precise modalities of direct bank recapitalisations.
It recalled EC President José Manuel Barroso's remarks in Dublin last week that "we are urging member states to stick to the spirit and the letter of the statement the European Council made in June … What is important from the commission's point of view is that direct bank recapitalisation breaks the link between bank debt and sovereign debt".
The Financial Times report has been seen as a setback for the Government, which wants ESM support for the cost to the State of recapitalising Ireland's surviving banks, Bank of Ireland, AIB and Permanent TSB.
A Department of Finance spokesman declined to comment on the report, adding: "Work on the June 29 agreement to break the link between sovereigns and banks is ongoing."
While the Financial Times report referred to a European Commission "proposal", it is understood that the commission does not make such proposals in the normal way since the ESM is officially outside its executive ambit.
"The commission has an explaining role at technical level to help experts," said an EU source. "It's trying to do the job of facilitation."