The Treasury is considering all options for financial aid to Ireland, Chancellor George Osborne has said.
But he refused to speculate on whether the UK was on the brink of announcing bilateral loans, or making a contribution to an EU bailout package.
He was speaking after talks in Brussels with his EU counterparts, at which Ireland's finance minister Brian Lenihan repeated Dublin's rejection — so far — of a bailout offer from the member states.
“We (the UK) are going to do what we regard as being in the British national interest: Ireland is our closest neighbour, so it is in our national interest that the Irish economy is successful and that the Irish banking system is stable,” Mr Osborne said.
“Britain stands ready to support Ireland on the steps it needs to take to bring about that stability.” He added: “I won't speculate on what kind of assistance we might provide. There are options, and we are looking at all of those.
“But remember, the Irish have not requested assistance and these are precautionary discussions. We (the EU) are having perfectly sensible, precautionary discussions about what happens if Ireland sought assistance.”
Taoiseach Brian Cowen yesterday denied Opposition claims the Irish government was involved in talks on a European bailout and tried to cover up negotiations.
Mr Cowen dismissed allegations he was not being straight with the public and insisted that Ireland had not opened discussions on an unprecedented aid package.
Under intense Opposition pressure and facing accusations that he had “raised the white flag”, the Taoiseach said talk of financial rescue was belittling Ireland.
“There has been no question of the government, as was being stated all over the weekend, in a negotiation for a bailout,” Mr Cowen said.
Most EU governments think Ireland will take advantage of a bailout — probably not before Dublin has unveiled a four-year recovery programme, expected to be published next week.
The fact that Ireland agreed on Tuesday to open its books to a team of EU, European Central Bank and International Monetary Fund (IMF) experts reinforced the view that a multi-billion pound bailout is on the cards.
IMF staff were expected to arrive in Dublin last night.