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Dublin is under pressure from the European Central Bank and euro zone peers to take a quick decision on applying for aid amid signs that market contagion is spreading to fellow struggler Portugal and could suck in bigger states.

The Irish government, trying to protect a slim parliamentary majority, says it is talking to European partners about how to provide stability for its banks but denies that a state rescue is needed to stop its problems spilling into other countries.

"I would hope after the Ecofin meeting this afternoon and tomorrow there would be more logic introduced into this," Ireland's European affairs minister, Dick Roche, told BBC Radio.

"There is no reason why we should trigger an IMF or an EU-type bailout."

Luxembourg Prime Minister Jean Claude-Juncker, who chairs Tuesday's talks in Brussels, said Ireland was not even close to asking for a Greek-style bailout, which would involve tough austerity terms enforced by the European Commission and the IMF.

But the Irish opposition said moves were already under way.

Bank of Spain Governor Miguel Angel Fernandez Ordonez urged Dublin on Monday to do more to calm financial markets, telling reporters: "It's not up to me to make a decision on Ireland, it's Ireland that should take the decision at the right moment."

Ireland's public borrowing needs are funded until mid-2011, but its bond yields have soared in the past week and its state-guaranteed banks are largely shut out of inter-bank lending and reliant on the ECB for funds.

This has helped push up the borrowing costs of other countries on the 16-country euro zone's periphery, such as Spain and Portugal.

The Irish coalition government has been reluctant to apply for assistance, partly because it faces a by-election it can ill afford to lose on November 25 and also because it says it wants to preserve its sovereignty.

Dublin has hinted it may ask for funding to support its banks, which were driven into debt by the global financial crisis and a property market crash, rather than requesting a politically embarrassing state bailout.

"The cost of money as expressed in the bond market has been very high although it eased today. We have to discuss these matters with partners ... how best to underpin financial and banking stability within the euro area," Prime Minister Brian Cowen told the national broadcaster RTE on Monday.

If such high borrowing costs became the norm, it would be hard for banks "to function as engines of recovery," he said.

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