Minister for Finance Michael Noonan will have separate meetings with the EU and ECB tomorrow to discuss the Government’s request for a reduction in the cost of Ireland’s bank rescue.

As the Government intensifies its efforts on cutting Ireland’s debt, Mr Noonan will hold talks with EU economics commissioner Olli Rehn and European Central Bank chief Mario Draghi

While the Minister reported progress in the Government’s campaign to secure lower borrowing costs on the loans used to recapitalise Ireland’s banks, he said the ultimate decision was for the 27 EU countries to take themselves.

Mr Noonan described tomorrow’s discussions as a medium-term initiative and indicated that no breakthrough was expected at an EU summit next in Brussels next Monday.

Mr Noonan was speaking this afternoon as he arrived in Brussels for two days of talks on the debt crisis with his euro zone and EU counterparts.

“There are talks going on as you know. At a working group meeting about ten days ago there was an agreement that the troika or their superiors would get together and develop a common paper,” he told reporters.

“That work is proceeding. Tomorrow I’m meeting Mr Rehn to discuss the issue with him and tomorrow afternoon I’m going down to Frankfurt to meet Mario Draghi. I have a meeting for about an hour down there so it’s proceeding,” he said.

“It’s a long decision-making process in Europe always, so we certainly have made progress at the level of the technical level. But of course, in the end of the day, to get a decision will be a matter for 27 individual countries.

“I’ve had conversations in Berlin with [German finance minister} Wolfgang Schauble last week and we sent some people to Paris the following day to talk to representatives of the treasury so we have intensified our efforts but I think it will take some time and we don’t want to get it entangled in other issues.”

On a possible referendum in Ireland on the EU fiscal pact, Mr Noonan said nobody could answer the question as to whether the people would back the treaty in any vote. “We don’t even have the completed yet and you don’t ever take the people for granted,” he said.

Tánaiste Eamon Gilmore said people who claim the Government it should not pay a €1.25 billion Anglo Irish Bank debt on Wednesday have never recognised the consequences of a default. Mr Gilmore said it was easy to argue against redeeming the senior unsecured bonds of the bank but added there would be serious consequences.

“If you don’t repay will people lend to you? If people don’t lend to us - and bear in mind what has caused us to get into the EU-IMF programme in the first place is that we weren’t able to borrow on the markets - we can’t bridge the deficit that we have,” he said.

“What happens to public services? What happens in the hospitals? What happens in schools? What happens to the pay of teachers, nurses, guards? What happens to social welfare payments?”

Meanwhile, the euro zone finance ministers are discussing the terms of a Greek debt restructuring they are ready to accept as part of a second bailout package for Athens.

Greece and its investors remain deadlocked over the actual loss that bondholders will incur and its impact on the country’s national debt. Although Greece and its creditors insist a deal is within reach, officials say the situation is increasingly urgent given the ongoing deterioration in Greece’s debt profile and the risk of an uncontrolled default if the talks fail.

Without the second bailout from the euro zone and the International Monetary Fund, Greece will not be able to pay back €14.5 billion in maturing bonds in March, triggering a messy default that would hurt the whole euro zone economy.

Germany and France pressed for a rapid deal between Greece and its private creditors that cuts its soaring debt to sustainable levels and said they were committed to a sealing a new bailout for Athens by March to avert a disastrous default.

French finance minister Francois Baroin said a deal to convince the banks and investment funds that own Greek debt to accept deep losses on their holdings appeared to be "taking shape."

But his German counterpart Wolfgang Schaeuble warned that any deal must help Greece cut its debt burden to "not much more than 120 per cent of GDP" by the end of the decade, from roughly 160 per cent today, something many economists believe will not be achieved by the existing plan.

"The negotiations will be difficult, but we want the second program for Greece to be implemented in March so that the second (bailout) tranche can be released," Mr Schäuble  told a news conference in Paris with Mr Baroin and the heads of the German and French central banks.

"Greece must fulfill its commitments, it is difficult and there is already a lot of delay," Mr Schäuble said.

After several rounds of talks, Greece and its private creditors are converging on a deal in which private bondholders would take a real loss of 65 to 70 per cent on their Greek bonds, officials close to the negotiations say.

But some details of the debt restructuring, which will involve swapping existing Greek bonds for new, longer-term bonds are unresolved.

Institute of International Finance chief executive Charles Dallara, the who is negotiating on behalf of the private debt holders, left Athens over the weekend saying banks had no room to improve their offer.

Sources close to the talks said today that the impasse centres on questions of whether the deal would return Greece's debt, currently over €350 billion, to levels that European governments believe are sustainable.

In Brussels, European economic and monetary affairs commissioner Olli Rehn said talks had been "moving well" and expressed confidence a deal could be sealed this week.

German chancellor Angela Merkel said there was no question of extending Greece a bridging loan if talks with the private sector dragged on further.

The euro pushed up to its highest level against the dollar in nearly three weeks on hopes Greece and the banks could overcome differences and seal a successful debt swap.

After dealing with Greece, euro zone ministers will choose a replacement for European Central Bank Board member Jose Manuel Gonzales Paramo, whose term ends in May.

The 17 ministers of the euro zone will then be joined by 10 ministers from the other European Union countries to finalise a treaty setting up the euro zone's permanent bailout fund - the €500 billion European Stability Mechanism (ESM). Its predecessor, the EFSF, is widely viewed as insufficient.

Additional reporting: Agencies