Minister for Finance Michael Noonan has said the issue of the permanent EU bailout fund being used to directly recapitalize banks will be discussed at a eurogroup meeting in Brussels.

Mr Noonan said specifically the issue of ESM funds being used to retroactively recapitalize Irish pillar banks AIB, Bank of Ireland and Permanent TSB will be discussed.

"It's a big day for Ireland," he told reporters as he arrived at the meeting of eurozone finance ministers.

He rejected reports that the promise to break the link between banks and sovereigns had been systematically watered down since the promise was made at a summit last June.

Mr Noonan said the issue of directly recapitalizing banks had been structured into three separate discussions at eurogroup level.

This was so that each time the technical aspects could win political support.

He said today’s discussion would focus on retroactivity, or how to compensate countries which recapitalized banks at a time when the current instruments were not available.

Mr Noonan also said that work was continuing on extending the maturities of Ireland's bailout.

He said Ireland's "ask" was for an extension of 15 years on average.

The IMF had always been helpful on this, he said, and drew attention to IMF managing director Christine Lagarde's visit to Dublin on Thursday.

Mr Noonan said it was the Irish Presidency's belief that a bailout for Cyprus should happen sooner rather than later, but he said the issues surrounding it were "difficult".

Cyprus has been in grave financial difficulty for months because its banks were heavily exposed to Greek debt.

After an election last month, the new Cypriot finance minister will update his eurozone colleagues on how his government views matters such as debt sustainability, privatisation policy and anti-money laundering measures.