Ireland's bank debt deal with the European Central Bank will reduce its borrowing needs by 20 billion euros over the next decade and cut its fiscal deficit by some 1 billion euros per annum, the country's prime minister said on Thursday.

Enda Kenny told parliament that Ireland would now make its first principle payment on the debt issued to prop up the failed Anglo Irish Bank in 2038, and the last in 2058, representing an average maturity of over 34 years.

"Today's outcome is an historic step on the road to economic recovery," Kenny said after his government won ECB approval to switch onerous IOUs put into Anglo with long-term sovereign Irish bonds.

"The new plan will likely materially improve perceptions of our debt sustainability in the eyes of potential investors in Ireland, leading to lower interest rates and faster growth than would otherwise be the case."

"A successful Irish exit from the bail-out by the end of this year would prove that a combination of intensive national reform efforts and European solidarity can deliver results."

(Reporting by Padraic Halpin; Editing by Carmel Crimmins)