The Government reluctantly vetoed a proposed ESB project in Poland because it was financially "far too risky and dangerous" for the company, the Taoiseach told the Dail.

Mr Ahern said there was no divergence of views between himself and the Tanaiste and the Minister for Finance about the project for which the ESB was tendering, the purchase of up to eight electricity companies in Poland.

There was no question of the Government being ideologically opposed to the ESB. "Everybody was in favour of the proposal," he said, but when it became clear that it would be bigger than the ESB itself, and would use its entire capital resources, "the view of all Departments and their officials was in the negative".

He rejected Opposition claims that the Minister for Finance had undermined his role as Taoiseach on the issue or that the ESB's reputation had been damaged in the 35 countries internationally in which it operated because of the veto. The ESB was one of five companies tendering for the project before the Government turned the proposal down.

"With some reluctance the Government had to say No," Mr Ahern said. The reason was "the risk to the ESB and the fact that it would tie up its investment outside of Ireland and not allow it engage in the huge amount of infrastructural work necessary here. It would also tie up a significant portion of the ESB's management. On those grounds the Government decided not to give the go-ahead."

The Labour Party leader, Mr Ruairi Quinn, who raised the issue during Taoiseach's questions, described Mr Ahern's responses as very unsatisfactory and asked about the "utter dismay" in the ESB and statements that the company's reputation as a vibrant and enterprising State-owned company had been seriously damaged by what appeared to be an "arbitrary and ill-judged intervention clumsily undertaken by a Cabinet which appears to be ideologically opposed to an enterprising State-owned company".

He asked about media reports that of the four Cabinet subcommittee members the Taoiseach and the Minister for Public Enterprise, Ms O'Rourke, were in favour of the proposal while the Tanaiste, Ms Harney, and the Minister for Finance, Mr McCreevy, were against it.

Mr Quinn said the ESB was involved in the project for up to six months and was close to making a final bid, having incurred costs of about £3 million on the project.

Mr Ahern said that "several million" had been spent on the project but pointed out that it was only in the last few weeks that the ESB had seen the full extent of the project.

As they went through the tendering phase of the process, the full scale of what was involved began to emerge. He said ESB management was anxious to keep going in the process "but did realise the difficulties involved".

The financial advice to the Government from all the Departments "was that this was far too risky and dangerous and that moving to the next stage of the process should not be recommended. We gave our answer on the basis of the collective view from all the Departments and all the financial advice we had available to us."

Mr Ahern rejected claims by the Fine Gael leader, Mr Michael Noonan, that when the Taoiseach appeared in public with the Polish Prime Minister, Mr Buzek, at Gothenburg, his assurances about the ESB project in Poland were "almost simultaneously undermined by his Minister for Finance" at a press conference.

Mr Ahern said he met Mr Buzek the day after Mr McCreevy's press conference, and neither event in any way undermined him. He pointed out that Mr McCreevy's view was the same as all of his senior officials.