Taoiseach Enda Kenny has warned the banks that the Minister for Finance could take action in the budget in October if the financial institutions fail to deal with variable mortgage interest rates.

Mr Kenny said Michael Noonan will have a follow-up meeting with all the banks in early September, prior to the budget in October.

He said “the option remains for the Minister for Finance in the absence of any real movement from the banks, to take further action in the budget in October”.

He also said that he would introduce legislation "on one condition" to give the Central Bank powers to deal with mortgage interest rates. He said the Central Bank had to request it.

“Ask and you shall receive,” he said.

Mr Kenny said Mr Noonan had received a report from the governor of the Central Bank "and the officials in the Department of Finance are now looking at the outcome of the meetings the Minister had with all the banks and the deadline of July 1st".

The Taoiseach insisted that “far from removing ourselves from the 300,000 people who are paying excessive variable mortgage interest rates… the pressure is still on”.

Fianna Fáil leader Micheál Martin had accused the Minister for Finance of having an “incredible nerve” to claim the banks had moved on mortgage interest rates, which in Ireland are some 2 per cent above the European norm.

He said the banks had taken no real action following meetings with Mr Noonan and the July 1st deadline to take action.

Mr Martin said the “pressure is off” the banks and this was unjust.

He also claimed the Government had “given up” on doing anything on mortgage interest rates and appealed to him to accept legislation from Fianna Fáil finance spokesman Michael McGrath to give powers to the Central Bank to deal with interest rates.

Mr Martin claimed the Government had leaked the EU report advising against legislation on the basis that the banks needed flexibility, in advance of the debate on the Fianna Fáil legislation.

Mr Kenny who described Mr McGrath as a “decent, determined politician” repeated the Government’s position that if the Central Bank requested legislation to have the power to deal with interest rates, the State would legislate but the Bank had said it did not require such legislation.

He also rejected claims he had leaked the report.

The Taoiseach insisted the banks had moved with some making offers of fixed rates or interest and some with cash back for customers. New products and facilities are being made available, he said.

Sinn Féin leader Gerry Adams accused Mr Kenny of "kowtowing to the elites" in Europe and of failing to stand up for Irish citizens.

“Isn’t it the case that your Government has consistent record in legislation in the interests of the wealthy and against the interests of everyone else,” he said.

But Mr Kenny said “you consistently come up with this nonsense about forgetting about the ordinary people - the focus of Government has been to create opportunity and jobs”. He listed the protections introduced for those on reduced incomes including removal from the tax net.

Mr Adams also claimed the Central Bank ran the State and not the Government and called on the Taoiseach to answer “yes or no” to the question of legislating to give the Central Bank powers to act on mortgage interest rates and “stand up for Irish mortgage holders”.

Mr Kenny said “Yes” on one condition. He said the Central Bank had to request the legislation.

“Ask and you shall receive.”