Revenue collapse

Ireland is preparing an emergency supplementary budget next month in a bid to curb its soaring deficit.

The move follows a 24 per cent collapse in tax revenue in the first two months of the year.

Hurley said Ireland's economic performance had deteriorated markedly.

He said: "The contraction in activity has deepened significantly, there has been a sharp rise in unemployment and a rapid deterioration in the fiscal position.

"We face significant challenges and it is critical for present and future generations that we work together now to confront them.

"If we do so, our economy will recover and has the potential to grow solidly again in the medium term. Our economy's strengths are important in this respect.

"There is the capacity for a rebound in productivity growth, the Irish labour market continues to be more flexible than most and at the start of the crisis, public debt as a percentage of GDP was low."

Mass demonstration

Last month, the government introduced a $2.5bn austerity package of which the central feature was a $1.8bn pension levy on some 350,000 public servants.

It triggered the largest public demonstration seen in Dublin for 30 years with an estimated 120,000 protesters taking to the streets.

Ronnie O'Toole, chief economist at National Irish Bank, said: "If 2008 was an Annus Horribilis for the Irish economy, 2009 is set to be a good deal worse.

"If the pace of deterioration of the Irish economy in the first three quarters of 2008 could have been characterised as surprising, the subsequent acceleration of the decline in Q4 and into Q1 of 2009 has been stark.

"The full ramifications of the scale and character of Ireland's economic reversal is still unfolding."