The extent of the pressure on Ireland in the run-up to the November 2010 bailout is revealed in newly released cabinet papers from the time.

They show pressure from the ECB for Ireland to borrow more from the EU and IMF, to allow it to immediately repay money borrowed from the Central Bank to bail out Anglo Irish Bank and Irish Nationwide.

They also confirm that Irish ministers and officials had to fight off attempts by EU leaders for Ireland to increase its 12.5 per cent corporation tax rate as the price of getting the bailout.

It has also emerged that the ECB suggested the State take on extra borrowing to repay the money owed to the Irish Central Bank, who had funded the €30 billion promissory note used to bail out Anglo and Irish Nationwide.

This would have increased the size of the bailout loan and replaced cheap borrowings for the State via the central banking system with much more expensive funds, raising a question about the viability of the whole programme.

In the event, this request from the ECB was not agreed.

‘Mounting concerns’

The papers show that in late September 2010, two months before the bailout, then minister for finance Brian Lenihan warned ministers the European Commission, European Central Bank and other financial institutions had “mounting concerns about our fiscal and banking situation and the implications for our debt dynamics” and that the situation was “very grave”.

Mr Lenihan told the cabinet in late October that there would have to be cuts of €6 billion in the budget for the following year.

The papers show the options examined by government in the run-up to the 2011 budget were restricting the Junior Cert exam to just Irish, English and maths, making some personnel in institutes of technology redundant and abolishing the State drug subsidy for patients with long-term illness.