Holders of Irish bank bonds should take losses instead of the Irish Government footing the bill for their bailout, European Central Bank governing council member Axel Weber said today.

Mr Weber, who is stepping down from the German Bundesbank at the end of April, said that it was a big mistake for governments to make taxpayers liable for all bank risks.

"To save a country's banking system, it is not necessary to write a blank cheque for the total balance sheet of the banking system," Mr Weber said during a panel discussion at German Banking Day.

"In Ireland, the question is whether the banking sector has to be saved as a whole," Mr Weber said.

"Would it not be a better route to isolate deposits, to minimise losses to Irish taxpayers and to find a complete solution ... with private sector participation instead of buying them out."

Mr Weber also said banks must participate in future crisis resolution. "There must be a participation of the banking sector in the solution of future crises," he said, and added: "It must be absolutely automatic as part of the investment conditions. Then it's clear and priced in from the very beginning".

Mr Weber also said markets are likely to keep euro zone periphery government bond yields at a high level for some time.