EUROPEAN Central Bank board member Lorenzo Bini Smaghi has said the bank is working on establishing a funding plan for Irish, Greek and Portuguese banks to complete their deleveraging, according to French newspaper Les Echos.

The measures must be gradual enough to avoid credit contraction, and firm deadlines to reduce their dependence on the Eurosystem, the central banker said, according to the newspaper.

Mr Bini Smaghi’s comments appear to run contrary to views expressed by incoming European Central Bank chief Mario Draghi some weeks ago, when he played down the scope for a special funding initiative for Irish banks.

At that stage, Mr Draghi made it clear he wanted to to wind down the bank’s “non-standard” measures to support the financial sector in the euro zone.

The European Commission has meanwhile cleared the Government’s plan to merge Anglo Irish Bank with Irish Nationwide Building Society and liquidate the enlarged entity over 10 years.

The commission’s approval for the plan is the first of many legal manoeuvres required to wind down the institutions, which have together received €34.7 billion in State aid.

“Today, the State aid chapter on Anglo Irish Bank and INBS has been finally closed,” said European competition commissioner Joaquín Almunia.

“I am satisfied that the distortions of competition caused by the enormous aid they have received is satisfactorily addressed by their exit from the market. Today’s decision allows us and the Irish Government to focus on the future of the Irish banking system.”

The two institutions must be formally merged for the liquidation process to begin, something which requires High Court approval. – (Additional reporting Bloomberg)