European Commissioner for Economic and Monetary Affairs Olli Rehn has reiterated that Ireland would no longer be a low tax economy.

When asked in an interview with RTÉ News if the corporate tax rate was now off the table for good, Mr Rehn said that by Ireland's ceasing to be a low tax country this did not imply specific measures, but 'it is likely unfortunately to imply tax increases'.

He said that there would be conditions attached to the EU/IMF rescue programme even if the programme were based on the Government's four-year budgetary plan.

Without going into specifics, Mr Rehn said the goal of the European Commission, IMF and ECB teams working in Dublin was that the Government's plan would meet the target of reducing the budget deficit to 3% by 2014.

The 'conditionality' would be discussed between the international bodies and the Government.

He said the front-loading of the cuts in the budget for next year would be the core of the plan.

When asked if he could foresee Irish banks closing, downsizing or merging as part of the restructuring plan for the banking sector, the Commissioner said it was premature to go into detail, as the objective was to put the sector on a viable path.

On the question of further contagion in the eurozone, Mr Rehn said: 'It is essential to stop the financial bush fire concerning Ireland before it becomes a Europe wide forest fire of financial turmoil.'

Meanwhile, it is believed that Minister for Finance Brian Lenihan last night thanked the German and French finance ministers for softening their stance on Ireland's corporate tax rate.

Mr Lenihan made his comments during last night's teleconference between the eurozone finance ministers, which approved Ireland's request for assistance.

It is understood Mr Lenihan thanked both Wolfgang Schäuble and Christine Lagarde after both the German and French leaders appeared over the weekend to retreat from a belief that Ireland should increase its corporation tax rate in exchange for a financial rescue.

Speaking at the NATO summit in Lisbon, German Chancellor Angela Merkel said the question of corporate tax was a matter for the Irish Government.

At the same meeting, French President Nicolas Sarkozy said his personal belief was that Ireland should raise its corporate tax rate, but that it was not a condition for the bailout.