Tanáiste Joan Burton has urged the banks to stop “extending and pretending” and agree realistic deals with struggling mortgage borrowers that allows them to repay their debts over time.

Ms Burton criticised the banks for pulling the plug at the last minute in debt discussions between borrowers and lenders, saying that an oversight procedure was required to monitor these negotiations.

"The banks have been rescued and brought into a recovery position by the Irish taxpayer who took responsibility for the debts. The banks owe Ireland and they owe the Irish people," she said

“They were the ones pushing credit on people, some of whom unwisely took more credit than they could actually sustain in terms of mortgages, but the banks had a role in that in the way they advertised the availability of credit. They have a responsibility.”

Speaking in Washington on the last day of her six-day St Patrick's Day visit to the United States, the Labour leader and Minister for Social Protection urged mortgage lenders to stop putting off making deals with heavily indebted borrowers.

“They can’t postpone it forever and people need to get their lives back, be able to get back into business again, back into employment again, deal with the debt,” she said.

Ms Burton said that many of the borrowers burdened with heavy mortgage debt are young families who bought houses at the height of the boom and are struggling to repay because they have lost their jobs.

“I want to see practical solutions that will actually bring the banks seriously to the table. The banks have been extending and pretending on quite a lot of deals over a long period of time,” she said.

The Minister is supporting a proposal tabled by Labour TD Willie Penrose to reduce the personal bankruptcy term from three years to one year in an effort to allow people to recover financially more quickly.

She also wants changes to the mortgage-to-rent scheme where homeowners become tenants and are allowed to remain in their homes.

“In some areas, the valuations are actually now unrealistically low,” she said.

Elaborating on her call in the US for the EU Commission to ease up on rigid fiscal rules to allow more spending in October’s budget, Ms Burton told The Irish Times she wanted “greater flexibility and realism” from Brussels to reflect Ireland’s improved financial position.

The way the EU rules on spending was calculated would “put a brake” on Ireland’s economic recovery as the fiscal limits were based on economic performance over years that included “the black-swan moments of Ireland” and some of the country’s most difficult years.

The country’s strong economic growth this year and last meant the country should have greater flexibility to spend more in the budget.

“As a country we have room to invest but also need to invest,” she said, pointing to the requirement to spend on education, broadband and employment “so that we get an economic recovery.”

Ms Burton visited Boston, Philadelphia, Pittsburgh and Washington on her US trip, meeting financial services companies in Massachusetts and medical and life sciences corporations in Pennsylvania.

The Tanáiste was asked about the Government’s conflicting position on lobbying the American government to allow illegal Irish immigrants to remain in the US legally when the Government has ruled out similar measures for up to 20,000 undocumented migrant workers in Ireland.

Ms Burton said that the Government kept the Irish immigration system “constantly under review” and that there were procedures in place for people who are coming to Ireland in order to be employed.

“All countries need immigration procedures which are fair and transparent, and ours are,” she said.