MINISTER FOR Finance Michael Noonan has said he would like to see a resolution of Ireland’s banking debt by the end of October.

However, he rejected a suggestion that it could lessen the severity of December’s budget.

“We are dealing with the problem of the debt and with the problem of the budget.

“And the budget problem is that we are not collecting enough in tax to cover what we spend in the provision of services.”

The debt would peak next year at 117 per cent of GDP.

“But if there was never any interest to be paid we are still about €14 billion on the wrong side of a balanced budget, and that problem has to be dealt with as a distinct fiscal problem.”

Mr Noonan was responding to Fianna Fáil finance spokesman Michael McGrath, who said an overall deal could mean a significantly reduced interest bill in 2013 which would make the budget easier.

Responding to questions on the outcome of last week’s EU summit, Mr Noonan said it represented an agreement in principle which provided an opportunity for the issue of bank debt to be addressed at an EU level.

“As the details have yet to be worked out, it is too early to say at this time what the precise implications of the announcement will be.”

Mr Noonan said there would be further discussions at the euro group meeting on July 9th.

“Preliminary discussions on how to separate banking from sovereign debt are under way, and I do not want to prejudice them by commenting on the likely contents of any agreement at this time,” he added.

Socialist Party TD Joe Higgins said there were no specifics as to what the development would mean for Ireland.

“Is there any concept of what difference this will make to, for example, the gross debt of the State?”

Mr Noonan said the principle had been set out, at the highest political level in Europe, that the vicious circle between banking debt and sovereign debt would be separated.

He added that the timeline started now, with one of the conditions being that a banking supervisor within the ambit of the European Central Bank had to be in place first.

“Then the details are worked out. And the timeline is to the end of 2012.”

Sinn Féin finance spokesman Pearse Doherty said that having listened to the summit’s conclusions the devil was in the detail.

He was afraid the Minister was not being ambitious enough in terms of what the Government was going to look for.

Mr Noonan said he was not too sure that the devil was in the detail. The eminent economist, Colm McCarthy, had said that the devil was in the principle, he added.

“Having the principle right is probably the most important thing. Then you can work on the detail subsequently,” said Mr Noonan.

Mr Doherty said the total debt of €64 billion had to be put on the table and the principle of retrospection fought for.