Fine Gael leader Enda Kenny has pleaded with fellow European conservative leaders for easier terms on Ireland's financial bailout loans but was told there would be "no free lunches".
Mr Kenny acknowledged that many European governments opposed his wish to make senior bondholders in Irish banks share the massive losses that forced his predecessors to seek an EU/IMF bailout last November.
"If that's not to be a focus of action, then there has to be another measure of flexibility shown," Mr Kenny told RTÉ in Helsinki on the sidelines of a meeting of the centre-right European People's Party.
German chancellor Angela Merkel, who attended the EPP talks, questioned on Wednesday whether there was any need to change the conditions of the €85 billion package, saying interest rates could not be cut artificially.
Finnish finance minister Jyrki Katainen said today before hosting the Helsinki meeting that the European Union should not loosen conditions on rescue loans for Ireland.
"There are no free lunches," Mr Katainen said in an interview. "Of course we have to take care that the Irish package really works, because it is in all our interests to ensure that Ireland will recover ... Therefore we have to look at the debt sustainability."
"I don't know exactly what will be the outcome because we have to at the same time look at the Irish sustainability development and be very strict. We don't loosen the package."
European Commission president Jose Manuel Barroso told reporters that Mr Kenny's determination should be supported, but Ireland needed to take "some tough measures".
Ms Merkel said earlier that European leaders must deliver a convincing response to the euro zone's debt crisis regardless of a European Central Bank threat to raise interest rates. She was speaking a day after ECB president Jean-Claude Trichet shocked markets by saying the central bank may increase rates as early as April due to inflation risks.
After talks with Luxembourg prime minister Jean-Claude Juncker, who heads the group of euro area finance ministers, on preparations for two crucial summits this month, Ms Merkel said they had agreed to do everything to keep the euro strong.
"Regardless of the question of the ECB and interest rates, we know that we need to put a joint package for the euro zone on the table," she told a joint news conference.
She stressed Germany's priorities to strengthen fiscal discipline and boost economic competitiveness in the 17-nation single currency area, but did not rule out letting the euro zone's temporary rescue fund buy government bonds.
Germany, the EU's main paymaster, has made no commitment so far to increasing the lending capacity of the European Financial Stability Facility or letting it help countries more flexibly.
Asked whether the EFSF might purchase bonds of vulnerable members states, Ms Merkel said: "There is a lot of discussion going on about possible options and these need to be examined."
Her centre-right parliamentary coalition parties and the Bundesbank have publicly opposed allowing the EFSF to buy bonds or lend money to fund debt buy-backs by states in difficulty.
EU diplomats say Germany is waiting to see what commitments other countries are prepared to give at a March 11th euro zone summit before showing its hand on the rescue fund and whether to allows its full €440 billion to be lent out.
Analysts said the ECB move raised pressure on EU leaders to agree on decisive action at this month's summits.
The ECB did agree to keep offering banks unlimited liquidity until mid-year, something Portuguese banks have relied upon.
Mr Juncker said after his meeting with Ms Merkel that markets were calm for now because they assumed EU leaders would find a watertight solution to the debt crisis by the end of March.
Tthe prime minister of Greece, the first country to require a euro zone bailout, warned of a bond market backlash if they failed to take bold decisions.
"If our decisions in the EU are not brave and effective, markets will react very quickly and we will find ourselves at the negotiating table again." sai George Papandreou in a speech to his Socialist party's national council in Athens, which was attended by Labour party leader Eamon Gilmore.
European Monetary Affairs commissioner Olli Rehn, speaking in Paris, cautioned that a successful outcome to the sovereign debt crisis "is by no means guaranteed".
In one sign of possible trouble ahead, Fitch Ratings revised down its sovereign credit rating outlook for Spain to negative from stable today, citing the long-term impact of restructuring its savings banks.
Fitch, which has Spain on an AA+ rating, said Madrid had exceeded expectations in fiscal consolidation, pension and labour reform but cited downside risks from a weak economic recovery, the banking sector shakeout and regional government spending.
Greece and Ireland are struggling with the same dilemma. Punitive interest rates imposed by the euro zone are higher than their projected economic growth rates, making it harder for them to service their growing debt burden in future.
A senior lawmaker in Ms Merkel's Christian Democratic Union (CDU) party said Germany might be willing to support a cut in the cost of the Irish rescue package if Dublin raised its low corporate tax rate.
Reuters