document: Ireland wants to hit bank creditors , ECB says no DUBLIN -LRB- AP -RRB- - Ireland still wants to force foreign bondholders to bear losses in debt-crippled banks but is being blocked by the European Central Bank , which has the lenders on life support , Finance Minister Michael Noonan said Friday . Ireland 's bank-bailout bill officially surged Thursday by 24 billion euros to 70.5 billion euros -LRB- $ 100 billion -RRB- as part of a new round of ECB-ordered stress tests . Ireland then unveiled plans to slash its largely nationalized banking sector down to just two : Bank of Ireland and Allied Irish Banks . Ratings agency Standard & Poor 's the next day said the tests ' assumptions were robust , that the worst was over , and the economy is now set to recover gradually . Although it downgraded Ireland 's credit rating by one notch , citing increased risks for bondholders under new EU rules to come into effect in 2013 , it expects the country to recover faster than Greece or Portugal - Europe 's other two worst debt offenders . It added it did n't expect any more downgrades soon , though S&P rival Fitch warned soon after that it may cut its own BBB + rating on Ireland soon as it assesses the stress tests and other developments since its last downgrade in December . In stock markets , traders reacted to the stress tests by chasing higher the shares of the two bank survivors , while shares of Ireland 's only other publicly listed bank , Irish Life & Permanent , plunged to a record low on news it will be broken up . But as experts digested the test results , the issue of how far to push losses on the banks ' bondholders remained the focus . Noonan said Ireland intends to force at least 5 billion euros -LRB- $ 7 billion -RRB- in losses on the most junior class of bank bondholders as part of its surging bailout bill . That represents a small concession by the ECB , which had until this week opposed such a move . But Noonan said hopes of forcing billions more in losses on senior bondholders - chiefly British , German and American banks - were again vetoed by a majority of ECB governors during negotiations that ran right up to Thursday 's announcements . Noonan said Ireland would not act unilaterally against the orders of the ECB , which along with the European Commission has been against forcing losses on bondholders since Ireland 's banking crisis erupted in 2008 . European financial chiefs made protection of senior bondholders a condition of its November bailout agreement with Ireland 's previous government , which was ousted from office three weeks ago amid voter fury over the terms of the deal . Noonan expressed frustration with Europe 's plans to introduce '' `` burden-sharing '' '' - forcing the creditors of failing banks to cover some debt-restructuring costs - under new rules after 2013 , too late for Ireland . He contrasted that with U.S. policies that hit bondholders early in its own banking crisis . '' `` The American way of doing things is to have burden sharing and to make creditors share in the pain . The European way is different , '' '' Noonan said . Noonan said a minority of governors at the Frankfurt-based ECB , notably Germany 's Axel Weber , agree with the Irish and American position , and he still hoped it would prevail in the medium term . But he said Ireland had to give up its hopes of greater burden-sharing for now because the ECB is the key source of short-term funds for all of Ireland 's banks , none of which is able to borrow on open markets . '' `` The bank in Frankfurt is supplying almost 200 billion euros -LRB- $ 280 billion -RRB- of liquidity to the Irish banking system . We said we wanted burden-sharing but we would not do it unilaterally . We would only do it with the agreement of Frankfurt and we did n't get the agreement , '' '' Noonan told Irish state broadcasters RTE . He said if Ireland burned any bondholders against ECB instructions , it would risk a loan cut-off and financial chaos . He said , instead , Ireland received '' `` the best we could hope for '' '' when the ECB pledged Thursday night to keep loaning Ireland 's banks money regardless of whether their credit ratings are slashed further . '' `` Did we risk the liquidity flow of 200 billion -LRB- euros -RRB- being cut off , particularly when we expect a downgrade of Irish bank paper ? '' '' he said . The ECB has already permitted Ireland to impose heavy haircuts on the junior bondholders at Ireland 's most disastrously managed bank , Anglo Irish . It was the first to be nationalized in 2009 , has cost the state more than 25 billion euros -LRB- $ 35 billion -RRB- , and is being dismantled . In October , Anglo offered its creditors holding 3.5 billion euros in subordinated bonds a deal that they could be repaid a fraction of their investment , between 5 percent and 20 percent - or refuse the offer and forfeit even more . The Central Bank of Ireland last month said Ireland 's six banks still have nearly 7 billion euros in outstanding subordinated bonds , which is debt that gets repaid in the event of bankruptcy only after senior bondholders get their money back . Those bondholders are next in line for brutal haircuts , according to Noonan . But ECB policy means Ireland can not impose cuts on 16.4 billion euros in senior bonds that are unsecured and outside the scope of Ireland 's bank insurance . Nor can the Irish prune any of the 19 billion euros in secured but unguaranteed bank bonds . Secured bonds are debt backed by collateral that can be handed over in case the debt goes unpaid . Noonan said Ireland reserves the right to push the ECB for approval to discount all remaining bonds at Anglo and Irish Nationwide , should any major bondholders there seek to cash in their positions early . Like Anglo , Irish Nationwide has already been fully nationalized , forced to transfer its deposit base to surviving banks , and is being wound down . The Educational Building Society is also fully state-owned and will be merged into Allied Irish . In midafternoon trade on the Irish Stock Exchange , Bank of Ireland was 40 percent higher at 0.31 euros -LRB- $ 0.44 -RRB- , Allied Irish 16 percent higher at 0.22 euros -LRB- $ 0.31 -RRB- . Irish Life & Permanent fell to an all-time low of 0.11 euros before rebounding to 0.18 euros -LRB- $ 0.25 -RRB- , still down 54 percent on the day .
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