The Government’s working on a “loan guarantee scheme” for companies suffering from the credit squeeze.

Bank are still showing a reluctance to lend money into the economy, and it’s expected to worsen when loans are transferred to NAMA.

But lending to viable business is essential if many are to recover from the recession.

Tánaiste Mary Coughlan says the loan guarantee scheme has been recommended in a report by the Mazars expert group.

“It’ll be based on a pool of money that’ll be made available and that part of that – you have to make sure that the risk is such that the default rate is not higher than the pool of money that’s being made available” she said.

“It’s a bank guarantee scheme; officials…in my own department are working to see whether it is feasible to introduce such a scheme, because it continues to be an issue of access to working capital for a lot of people”.

The credit freeze may get worse, after ratings agency Standard and Poors declared it expects losses in Irish banks to top €50 billion by next year.

“There have been a number of bank guarantee schemes that have not been working well, and we are learning from what is happening in other member states – and we’re also looking at a number of other new initiatives outside of the EU which have been forthcoming” the Tánaiste continued.

“In other words, you’re guaranteeing that the company will be in a position to repay its debt” she added.