The Government was warned at the height of the financial crisis that the Defence Forces might be required to provide armed protection for all major Irish banks if a cash shortage was triggered.
The dramatic plea for a “fallback position” to be drafted was made to Taoiseach Enda Kenny sometime after he came to power in 2011.
The revelation came today as Defence Minister Simon Coveney launched a staunch defence of Taoiseach Enda Kenny and his leadership of both Ireland and Fine Gael.
Mr Coveney's comments came as former FG Cabinet minister, Ivan Yates heavily criticised Mr Kenny's leadership and suggested the party could now start looking for his successor.
Mr Yates, who served in Cabinet alongside Mr Kenny under former Taoiseach John Bruton, said the water charges issue had seriously damaged Mr Kenny and his leadership.
However, Mr Coveney insisted that Ireland owed an enormous debt to Enda Kenny.
"We were losing about 1,000 jobs per week. The economy was wrecked and the country was bust," he said
"The Taoiseach was getting briefed by the Central Bank that actually he needed to have a fall-back position whereby the army might be needed to surround banks to protect them because we could literally run out of money."
Read more: "Ivan's a mercenary. He's been very wrong in the past."
"That is how close to the edge we were as a country because of political mismanagement in the past," he said in an interview with Newstalk.
Mr Coveney is defending Mr Kenny’s leadership and pointing to his record as Taoiseach.
The Cork TD said that from that precarious financial position Mr Kenny had guided Ireland out of the 'Troika' governance programme and helped make the domestic economy the fastest expanding in Europe.
Mr Coveney also said that Ireland is now creating record numbers of jobs and is set to drive unemployment below 10pc.
He said that while mistakes had clearly been made in relation to the water charges issue, the Government had helped restore Ireland's economic and financial credibility to the point where the future is very bright.
Mr Kenny personally hit out at Mr Yates' comments.
He accused the former Wexford TD of being "a mercenary" and said he had been "very wrong in the past."
Mr Yates is now a top broadcaster with Newstalk and has written an acclaimed biography detailing his political career and the personal financial challenges he faced over the failure of his betting firm at the height of Ireland's economic crisis.