The European Commission has accepted that the cost of funding the National Asset Management Agency will not be added to the national debt.

Read Sean Whelan's analysis

The commission's statistical service has acknowledged the Government’s method of treating NAMA as an off balance sheet Special Purpose Vehicle (SPV).

That means it will not be included in the figures used to calculate the national debt.

The €54bn required to fund NAMA represents around 30% of gross domestic product (GDP).

On top of the very rapid increase in the Government debt as a result of borrowing to fund the Budget deficit, the inclusion of the NAMA sum in the national debt calculation would have pushed the debt/GDP ratio well over 100% next year.

Under the EU Stability and Growth Pact, countries are supposed to have a debt/GDP ratio of 60% or less.

The Irish Government has been given five years (instead of the normal two) to get its debt ratio down to the target figures. Not having the NAMA money included makes that task easier.

The most recent Department of Finance estimate for Ireland's debt ratio is 59% for the end of this year, rising to 73% by the end of next year.

The planned effect of today’s decision is to ensure that Ireland does not break 100%.

ARC believed to have €3bn in backing

The vehicle established to buy property loans from foreign-owned banks, Asset Resolution Corporation, is believed to have commitments of about €3bn from financial backers.

The Asset Resolution Corporation is targeting banks that are not covered by National Asset Management Agency.

Former chief executive of Bank of Scotland Ireland Mark Duffy and one of Ireland’s biggest property fund managers Kevin Warren have teamed up for the venture.

The Asset Resolution Corporation intends to buy property loan portfolios from foreign banks in Ireland at a discount.

Those banks could include Ulster Bank, Bank of Scotland Ireland, National Irish Bank and ACC.

The money will come from institutional investors such as British pension funds.

Investors would want to want to see a 15% return on their money in over a seven- to ten-year period.

Some of the money will be borrowed and could be borrowed from the banks the new company will be buying loans from.

The Asset Resolution Corporation would seek to take over loans early next year.