The prospect of the ECB’s planning to buy mortgages and other assets from banks and providing Irish banks with a way out of the tracker mortgage dead end suffered a setback last weekend.

ECB vice-president Vitor Constancio indicated that the bank would be very picky about what it buys. In financial lingo, it would only buy the senior tranches – or less risky bits – of any package of mortgages or other assets that might be served up to it.

The banks would have to find other buyers for the riskier bits – mezzanine and junior tranches – of these asset-backed securities, or ABS. This would would be difficult in the case of an ABS based on Irish tracker mortgages alone as the ECB is really the only buyer in town.

Alternatively, the banks could hold on to the lower tranches themselves, but this would greatly dilute the positive effect of scrutinising their trackers.

There are various other solutions, all involving greater or lesser amounts of slicing and dicing or financial engineering. Constancio himself indicated one possible solution, which would be for a third party, most likely a government, to guarantee the riskier tranches.

In theory, this should not pose any great difficulty for the Irish Government as it explicitly stands behind AIB and PTSB – which it owns – and implicitly supports Bank of Ireland. We are already way offside in terms of State aid and competition rules.

The problem, however, is that any move in that direction – Government guarantees – is counter to the measures brought in by Europe last few years with the objective of breaking the link between Government's finances and their banks.

But – and there is always a but when it comes to Europe – Ireland has been told that the historic link between the Irish exchequer and the banks created by the 2010 bailout is not covered by these measures.