Taoiseach Enda Kenny has reported a measure of progress in talks with German finance minister Wolfgang Schäuble on the stalled "banking union" plan, saying the German minister understood the need for urgent action. He also ruled out any move by the Government to seek more time from the European authorities to bring the budget deficit within EU limits.

Mr Kenny met Mr Schäuble for 40 minutes yesterday on the margins of an economic conference in Granada, Spain, and travelled afterwards to Lisbon for talks with Portuguese premier Pedro Passos Coelho.

Deficit control
Asked in Lisbon whether he would follow moves by Portugal to seek a two-year extension of the deadline to bring its deficit under control, Mr Kenny said Ireland was already the beneficiary of a one-year extension: "Our fiscal plan sets out our intention to get our deficit below 3 per cent by 2015 and we're going to stick with that plan."

The meetings with Mr Schäuble and Mr Coelho followed talks on Sunday with Spanish premier Mariano Rajoy. “I have explained to minister Schäuble the importance of banking union for Europe given the difficulties that this has caused and is causing in countries in the euro zone. He’s well aware of that,” Mr Kenny said.

"Obviously I don't speak for the Bundestag here but minister Schäuble is very much of the view that we have to move forward here and we do hope that between here and June that we can make further significant progress on that."

Although Mr Kenny did not elaborate, Berlin has been resisting moves to empower the European Stability Mechanism bailout fund to retrospectively compensate member states for taking on historic banking losses.

In Lisbon and Grenada, Mr Kenny said it was crucial for the credibility of EU leaders to come good on their pledge to break the link between bank and sovereign debt.

Like Mr Rajoy before him, Mr Coelho backed the Taoiseach's demand for action. "Decisions that were taken at the level of the European Council have to become effective," the Portuguese leader said.

Presidency agenda
Mr Kenny discussed Ireland's EU presidency agenda with the two premiers. The talks came in advance of a summit in June at which EU leaders will return to the "banking union" initiative.

Of prime interest to Dublin is a delayed plan to enable the ESM bailout fund to recapitalise stricken banks directly. Other initiatives to “resolve” failing banks at reduced cost to taxpayers are also in the frame.