Taoiseach Enda Kenny is no longer seeking an immediate deal for lower interest rates on bailout loans and will not propose any concession to his EU counterparts when he meets them tonight in Brussels.
In a change of strategy ahead of a two-day European summit, the Government has decided to "park" the interest rate question until bank stress tests are completed next week.
This emerged as the euro dropped by 0.8 per cent last night after the resignation of Portuguese prime minister Jose Socrates, increasing pressure on EU leaders as they try to intensify the battle against the sovereign debt crisis.
The Government sees its campaign to ease the burden on the State from bank bailouts as being of most significance and that objective will now be pursued alongside the interest rate cut. "Everything I've been told so far confirms that there will not be a push for an Irish agreement this time," said a senior European diplomat.
Dublin expects to return to these matters within weeks, most likely at a finance ministers' meeting in Hungary in a fortnight.
At his first summit two weeks ago, Mr Kenny refused to yield to Franco-German demands to dilute Ireland's corporate tax regime in return for lower bailout costs.
The diplomat insisted the Taoiseach was still making progress in his effort to secure lower bailout costs without capitulating on corporate tax.
Responding to suggestions that Ireland may require a new bailout loan following the bank stress tests, a Government spokeswoman said only that Minister for Finance Michael Noonan has pointed that the examination will not be finished until next week.
The EU-IMF plan includes €10 billion to recapitalise the main banks and a €25 billion fund for contingencies. But it is believed in Dublin that the stress tests will show more may be needed.
"We're not expecting any resumption of the Gallic spat," said a diplomat, citing Mr Kenny's description of his exchanges with French president Nicolas Sarkozy at the last summit.