The recapitalisation of Spanish banks has dominated this evening’s meeting of eurozone finance ministers in Brussels, with the Greek and Cypriot bailouts also due for discussion.
However Ireland is hoping to make progress on the written commitment it received from eurozone leaders for its debt to be placed on a sustainable footing.
EU leaders agreed at a summit 10 days ago to set up a single bank supervisory authority as soon as possible, as a precondition for the ESM to recapitalise banks directly, rather than through governments.
Spain remains under pressure on financial markets as its long-term borrowing costs reach unsustainable levels.
It called for such direct aid to stabilise its banks so as to avoid adding to its existing sovereign debt burden.
But the ministers will need to clarify whether - and when - states might have to guarantee any direct aid given to the banks before the supervisory authority comes into being, an event that "will not occur before the first half of 2013," a senior EU official said Friday.
"Before we change the overall approach, any recapitalisation is against the guarantee of the sovereign," said the official, speaking on condition of anonymity. "The first Spanish banks will need to be recapitalised by the end of this year, and many others in the spring of next year," he added.
In a distant future, when a single supervisor oversees all euro zone banks, sovereign guarantees "might not" be demanded in exchange for recapitalisation funds, the official added.
A spokesman for the EU's economic affairs commissioner Olli Rehn said today that "once a single supervisory authority is in place, the ESM can decide to recapitalise directly and there will be no sovereign guarantees."
The euro zone's 17 finance ministers were expected at today's talks to reach "a political agreement" on a rescue for Spanish banks that would be formalised at new talks expected July 20.
On arriving for the meeting, French Finance Minister Pierre Moscovici called for quick progress on banking supervision. "We must advance strongly on banking supervision, it is important to move quickly." He called for an operational mechanism to be in place by the end of the year "to enable us to advance on direct recapitalisation by the ESM."
Arriving for the talks this afternoon, Minister Noonan refused to talk about how much debt he hoped to renegotiate but said the target would be ambitious.
He said he hoped to nail down a timetable for those talks at the finance ministers meeting, with a conclusion before December's Budget being in the national interest.
While talks with the EU, ECB and IMF to date have been focused on Anglo Irish Bank promissory notes discussions had now widened.
However agreeing a timetable is the key objective of today’s eurogroup meeting.
Pressure continues to mount on embattled states
Market pressures mounted today before the euro zone finance ministers' meeting to follow up quickly on action agreed last month to tackle the debt crisis.
Borrowing rates for Spain and Italy rose, with the Spanish 10-year rate surging back above the danger level of 7%, amid scepticism that the meeting would make much progress.
On Saturday, Spanish Prime Minister Mariano Rajoy announced that he would take additional steps soon to cut the public deficit and called for quick progress on the summit agreements.
"What will really determine their success is that they turn into concrete realities, in a supple, quick and effective way," Rajoy said, adding: "Europe must fulfill the accords as swiftly as possible."
French Finance Minister Pierre Moscovici said that today's meeting would "translate into action" the summit decisions but added that there would be another gathering "in July, on July 20 I think."
Moscovici, who met Italian Prime Minister Mario Monti yesterday, said "one has to go further" to help the Spanish banks and "move quickly" on tighter banking regulations to speed up bailouts to struggling lenders.
German Finance Minister Wolfgang Schaeuble, however, played down the prospects that Spain would get help for its banks anytime soon, insisting on the quid pro quo of tighter overall regulation first.
"Before direct aid is given to the banks, there must be a common banking supervisor," El Pais quoted Schaeuble as saying. "But this body will not start functioning this year. That is not very realistic," he added.
One Spanish newspaper report suggested that a condition for help for the Spanish banks would be a tightening of the banks' capital base.
In turn, Italy's Monti said he wanted the finance ministers to implement the decisions "rapidly in operational terms." Monti, among others, had described the June 28-29 summit breakthrough accords as coming only after Germany had made significant concessions, a view Chancellor Angela Merkel has consistently rejected.
Greece, meanwhile, has asked for more time on its latest debt bailout, saying that while it accepts the tough terms, it needs some slack so as to ease the pressure on an economy stuck deep in recession for a fifth year.
The country is again behind in meeting targets under its rescue programmes.
In Brussels last week, an EU official said Greece would not get its next instalment of aid "until the Eurogroup (of finance ministers) has determined that the programme is back on track," with no decision likely until August.
Today's meeting is also expected to discuss who should succeed Luxembourg's Jean-Claude Juncker, who is due to step down on July 17, as head of the euro zone finance ministers group. Moscovici said France wanted Juncker to stay on, until a "possibly more lasting solution" can be found to the debt crisis.
The German weekly Der Spiegel reported that Paris and Berlin have reached a compromise whereby Schaeuble would head the group next year, with Moscovici following in 2014.