The Cabinet met today to approve a recommendation by Minister for Finance Brian Lenihan to apply for a financial bailout from the International Monetary Fund and the European Union.
Following several days of negotiations with IMF/EU officials in Dublin, Mr Lenihan said at lunchtime today he would recommend the Government applies for an unspecified bailout loan to ensure it had enough "firepower".
The Minister said he had reviewed the negotiations last night and decided that the time was right to make an application for loans for both the State and the banking system.
In an extended interview on RTÉ Radio's News at One, Mr Lenihan said: "I will be recommending to the Government that we should apply for a program and start formal applications."
He declined to be drawn on the exact size of the loan but he indicated it would be in the tens of billions.
When asked about the scale of the loan likely to be sought, Mr Lenihan confirmed that the figures would be tens of billions but would be "nowhere near" €70 billion or €80 billion as suggested by the presenter Richard Crowley.
He also said it would not be a "three figure sum".
The Minister said the interest rate charged on the loan had yet to be agreed but would be significantly lower than the rate currently available to the Government on international bond markets.
Mr Lenihan admitted for the first time the banks had become too big a problem for the country to resolve on its own. "The key issue all the time for the Government is to ensure that we do not have a collapse of the banking sector."
He said Ireland may not fully use any cash it gets from the EU and IMF, which would "a powerful demonstration of firepower behind the banks".
"Some of that amount may be required in terms of capitalising the banks," he said. "That can only be established after detailed stress tests are done. In relation to the State I've pointed out there's an annual gap of €19 billion.
"The point I want to make is that, whatever figure is arrived at, it will not necessarily be drawn down. It is a figure that will illustrate the kind of support that is available the Irish banking system. Not all of the money will go in at all. It is a standby fund.
"The banks have been operating with massive support from the European Central Bank and they will continue to operate on that basis but because of the degree of maintenance and support from the ECB, it is essential that we deepen the approach to addressing the structural problems in the bank.
"The focus of the discussion is to establish a capital fund that will demonstrate that the banks have the firepower in the event that further losses materialise in them."
The Cabinet is meeting this afternoon to finalise its four-year recovery plan for the economy. It is expected to sign off on the 160-page document which charts how the State will reduce its outgoings by €15 billion between now and the end of 2014.
As International Monetary Fund and European Commission officials resumed their audit of the State's accounts today, senior departmental officials indicated the austerity plan would be published on Tuesday.