Ireland's government moved on Monday to quash speculation it would be forced to seek a second EU-IMF bailout and said it would make a tentative return to international debt markets in the final quarter of next year.

Dublin is trying to distance itself from the woes of euro zone struggler Greece, which is trying to avoid a potentially devastating default and seems certain to require a second bailout to plug a looming funding gap.

Finance Minister Michael Noonan categorically ruled out Dublin requiring a top-up to its 85 billion-euro rescue package, seeking to limit the fallout from a cabinet colleague's warning over the weekend that another bailout may be needed.

There is no question of a bailout package having to be brought in next year, Noonan told state broadcaster RTE. We have sufficient money from the IMF and European institutions to carry the country forward in all eventualities and the program runs until the end of 2013.

A second bailout doesn't arise because of that.

Noonan said Dublin would test market sentiment for Irish debt in the final quarter of 2012 after a two-year hiatus.

We won't be fully back in the markets but we hope that the NTMA (debt management agency) will be able to raise some private funds in the market in the last quarter of next year.

Many economists have come round to the view that some sort of further aid and restructuring of its debt is likely to be inevitable to allow Greece to deal with a debt burden of more than 150 percent of its annual national output.

Ireland's debt is expected to peak lower than that but still top 120 percent of GDP in 2013 and Irish bond yields have sky-rocketed as Greece's debt crisis deepened, reflecting market concerns it may face a similar fate.

The Irish central bank said investors needed further reassurance that its EU-IMF program was on track.

Market spreads on Irish government paper have moved in the wrong direction since the program started... markets probably need more time to see persistent adherence of the program, Governor Patrick Honohan told national broadcaster RTE.

Continued adherence to the path is the way to get back to the markets, he said.

'A BIG ASK'

Analysts said even with a clean EU-IMF report card, Dublin faced an uphill challenge.

We currently have 5 year paper trading at 12 percent, 10 year paper trading at 11. Clearly if this is where we are next year Ireland is not going to capital markets. I think yields have to get into single digits and heading south, said Padhraic Garvey, rate strategist at ING.

It's a big ask. It's not impossible, but it's a big ask.

The average interest rate Ireland is paying on its EU and IMF loans is estimated at 5.8 percent.

Of the 85 billion euros bailout, some 17.5 billion euros is from existing state borrowing and cash balances and 35 billion euros is earmarked to shore up the banks.

Ireland and its creditors are hoping that only 19 billion euros of that 35 billion will have to be channeled into the banks and the IMF has said that whatever is left over could be used by the state if there is a delay in returning to markets.

Dublin is currently forecasting a deficit in 2013 of 12 billion euros.

Brian Devine, economist with NCB Stockbrokers, said he still believed Ireland would have to tap the ESM, the EU's permanent rescue fund, in 2013.

I don't see how things are going to clear sufficiently for it to be otherwise, he said. The government will dip their toes first by issuing treasury bills but that will be to provide some short-term liquidity and gradually work our way back into the market.

Tapping the ESM might require some restructuring of privately held sovereign debt. Reflecting that medium-term risk, Ireland's two-year and five-year paper are yielding around 12 percent, more than its 10-year bonds on the secondary market.

Irish officials have insisted that their economy is on a growth trajectory, unlike Greece, but Honohan said there was no guarantee that Ireland would recover this year.

Nobody can be absolutely sure that there will be growth this year -- our forecast is that there will be some growth in GDP this year but the margin of error is sufficiently small that nobody can be sure that it will actually be positive, he told RTE.

It's only in 2012 that we can forecast the return to what we would like to see as solid growth.

(Additional reporting by Padraic Halpin and Conor Humphries; editing by Patrick Graham)

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