The Government has decided to close Ireland's embassies to the Vatican and Iran as well as its representative office in Timor Leste.

In a statement this evening, Tánaiste Eamon Gilmore said that the decision followed a review of overseas missions carried out by the Department of Foreign Affairs, which gave “particular attention to the economic return from bilateral missions”.

Mr Gilmore said that the Government was obliged to implement cuts to meet targets set out in the EU/IMF rescue programme.

He said the closure of the three embassies would save around €1.25m a year.

He said that while the embassy to the Holy See was one of Ireland's oldest missions, it yielded no economic return, and that Ireland’s interests could be sufficiently represented by a non-resident ambassador.

He said the Government will be seeking the agreement of the Holy See to the appointment of a senior diplomat to this position.

Speaking this evening, Mr Gilmore said the closure of the embassy in the Holy See was not related to the recalling of the Papal Nuncio from Ireland earlier this year.

The Tánaiste said the Government would not be selling Villa Spada, the Irish embassy in the Vatican. Instead, staff working in embassy to Italy in Rome, which is a rented premises, will be transferred to Villa Spada.

Responding to the decision, the Primate of Ireland said he wished to express his "profound disappointment" at the closure.

"This decision seems to show little regard for the important role played by the Holy See in international relations and of the historic ties between the Irish people and the Holy See over many centuries," said Cardinal Seán Brady.

The Vatican also issued a statement this evening in which it said noted the decision. It said every state was "free to decide, on the basis of its possibilities and its interests, whether to have an Ambassador to the Holy See resident in Rome or in another country.

"What is important is diplomatic relations between the Holy See and states, and these are not in question with regard to Ireland."

The prestigious Villa Spada is the most valuable property owned by the diplomatic service.

A spokesman for Mr Gilmore said that it was for the Holy See to decide the manner of its representation here.

The Vatican was among the first states with which the newly independent Irish Free State established full diplomatic relations in the 1920s.

He also said the move would allow for the relocation of six staff to offset losses elsewhere in the diplomatic service.

The changes announced today are expected to come into force in the New Year.

In his statement, Mr Gilmore said that trade volumes in Iran had fallen short of expectations, leading the Government to close the embassy in Tehran and to seek Iran's agreement to a non-resident accreditation.

The office in Timor Leste had been opened in 2000, to administer a bilateral aid programme, and while this programme would continue, Mr Gilmore said, it was no longer necessary to maintain a resident office in Dili.

Ireland’s ambassador in Singapore will continue to be accredited to Timor Leste, he said.

Mr Gilmore said that the Government would continue to review Ireland's network of diplomatic and consular missions “to ensure that it reflects our present day needs and yields value for money”.