The Irish government urged parliament on Tuesday to approve a tough 2011 austerity budget which foresees 6 billion euros in savings and must win passage for the country to receive emergency loans from the EU and IMF.

In a speech to parliament, Irish Finance Minister Brian Lenihan sketched out a series of spending cuts and tax hikes which include reductions in child benefits, pay cuts for public servants and changes to tax bands that target low-earners.

The scale of this adjustment is demanding, but it demonstrates the seriousness of our intent, Lenihan said.

A property bubble has transformed Ireland from one of Europe's brightest stars to a country that has been forced to seek an 85 billion euro bailout from the IMF and the EU to cover its borrowing costs and shore up its banks.

Prime Minister Brian Cowen needs to get his 2011 fiscal plan past parliament to access the first tranche of emergency aid and despite a razor-thin majority he is expected to win passage in a series of votes that begin Tuesday night.

We need their support to break the vicious cycle that has threatened our national finances and our banking system, Lenihan said of the EU/IMF bailout, which has stirred outrage in the humbled former Celtic Tiger.

Once all the resolutions underpinning the budget have passed early next year, Cowen, the most unpopular leader in recent Irish history, has promised to call an election he is widely expected to lose.

That means a new government, most likely a coalition of the center-right Fianna Fail and center-left Labour, will be tasked with overseeing 6 billion euros ($8 billion) in budget savings next year, which will hit an economy already smarting from a prolonged recession.

Both parties have said they will re-negotiate the terms of the bailout package agreed late last month. But in practice the opposition will have little room for maneuver, having agreed to the broad targets of the rescue plan.


The 2011 budget is the toughest in a four-year austerity plan that aims to save 15 billion euros -- nearly 10 percent of annual economic output -- and get the worst deficit in the region back within EU limits by 2015 at the latest.

Cowen will push through some four billion euros in spending cuts next year, with social welfare benefits, public pensions and capital projects all set for the chop.

I'm afraid for the future, I'm afraid for the country and everyone around me, said Maeve, a retired lecturer who broke into tears when talking about economic hardship at the Moore Street market in central Dublin.

I look at the misery around me and wonder what will happen to this country, she said, as icy rain pelted the Christmas shop windows in the inner-city.

Tax adjustments will make up another two billion euros with roughly half of the additional revenues coming from lowering income tax bands and tweaking tax credits, allowing the government to target the 45 percent of workers, on lower incomes, who did not previously pay income tax.

Some economists have warned the measures risk tipping Ireland into a prolonged downturn that would make its debt targets even harder to achieve.

But Lenihan said the economy could withstand the cuts and growth thanks to robust exports.

Yes, domestic demand remains weak, as households and businesses continue to work off the excesses of the boom, he said. But continued export growth will protect and expand high-value employment and stimulate domestically trading sectors of the economy.

Parliament's lower chamber will vote on changes to excise duties and sales taxes in the evening.

A vote on social welfare measures and another vote on changes to public pensions are due next week. A fourth vote on general finance steps is due in the first quarter of 2011.

A failed vote this week or next would trigger a general election and prevent the flow of funds from the EU and IMF until a new administration was in place.

Ireland's budget deficit is set to blow out to a jaw-dropping 32 percent of gross domestic product (GDP) this year due to the one-off inclusion of a 30 billion euro-plus bill for shoring up its banks.

(Additional reporting by Carmel Crimmins, Jodie Ginsberg and Yara Bayoumy)