By Eamon Quinn

DUBLIN--Ireland will be "aiming high" in upcoming negotiations to lighten the country's huge bank debt burden following a euro-zone agreement to allow rescue funds to finance the bloc's broken banks, Ireland's deputy leader Eamon Gilmore said Sunday.

Since the agreement was struck late last week in Brussels, the Irish government has hailed the decision of euro-zone leaders--to use the euro zone's European Stability Mechanism to directly recapitalize banks--as a "seismic" development in Ireland's efforts to get a grip on its five-year banking crisis.

It had long complained that the euro zone had unfairly obliged Irish taxpayers to shoulder most of the costs of rescuing formerly private banks when the country's bloated commercial property market crashed from 2008 onwards. Amounting to about 63 billion euros, or 40% of its annual economic output, Ireland faces one of the world's costliest bank rescues.

As those bank-rescue costs escalated, it was forced to strike a 67.5 billion euro bailout deal with the EU, International Monetary Fund and European Central Bank, in late 2010.

The Irish authorities have argued that refinancing the banking debt burden will help it get back to full market funding next year, and boost the country's modest economic recovery.

The euro-zone agreement on bank debt has now opened the way for Ireland to negotiate a debt-lightening deal before the end of the year, Mr. Gilmore told Irish broadcaster RTE Radio, saying he was "confident that we will also succeed on this matter."

Though his government would be "aiming high" in private negotiations with euro-zone authorities, he refused to specify how much of Ireland's banking debt it hoped to have refinanced in any such future deal.

"Our objective is to improve the country's debt sustainability; to minimize to the greatest extent possible the burden of the bank debt of the Irish taxpayer; to improve Ireland's credit rating and in doing so to improve the possibility of credit extending right through the economy so that jobs are created and we get economic recovery faster," he said.

Since the agreement was announced, government ministers had refused to say how much of the 63 billion euros that Irish taxpayers pumped into its stricken lenders could be retrospectively refinanced through the ESM, saying that they hoped negotiations would agree on the figure before October.

The government had previously estimated it may refinance between 30 billion euro and 40 billion euro of its bank aid through the ESM.

Citing unnamed senior government sources, the Irish edition of The Sunday Times reported that Ireland will seek to refinance approximately 32 billion euros it has pumped into three surviving banks--Allied Irish Banks PLC (ALBK.DB), Bank of Ireland PLC, and Irish Life & Permanent PLC.

Separately, it still wants to restructure 32 billion euros in promissory notes pledged to two other so-called "dead" banks--Anglo Irish Bank Corp. and Irish Nationwide Building Society, now jointly renamed the Irish Bank Resolution Corp., the newspaper said.

Write to Eamon Quinn at eamon.quinn@dowjones.com