Ireland's campaign to reduce its bank-related debt as part of a drive to improve the terms of its EU/IMF bailout is receiving close attention, the country's central bank governor said on Tuesday.

The government is in slow negotiations with European partners over improving the terms of its 63 billion euro bank rescue package, focusing in particular on attempts to refinance some 30 billion euros worth of IOUs pumped into failed lender, the former Anglo Irish Bank.

Irish Finance Minister Michael Noonan met European Central Bank President Mario Draghi last week in a stepping up of the campaign, and Draghi's ECB Governing Council colleague Patrick Honohan noted the attention it was being given.

It is worth noting that the net running cost to Ireland of servicing the bank-related debt has so far been less than it might have been because of the way it has been financed, Honohan said in a speech.

Continuing to optimise policy in this area is something that is receiving close attention. Much of this work involves dealing with powerful external forces.

Ireland has also been pursuing other ways to shore up its chances of exiting the bailout next year, particularly with economic growth slowing, and last week cut 3.5 billion euros from its hefty 2014 borrowing requirements through a bond switch.

Following the most significant test of sentiment since exiting bond markets in September 2010, Honohan said market confidence was slowly returning but warned a sustained upturn was some time away.

It is clear that market confidence, badly knocked since the bank guarantee and its aftermath, has been seeping back, he said.

Overall, the fiscal and competitiveness adjustment is certainly happening, and the economic contraction has been arrested, though a sustained and vigorous upturn remains some time away.

(Reporting by Padraic Halpin)