The Economic and Social Research Institute says it is concerned that attempting to reduce the budget deficit to 3% by 2014 could tip the economy into a deflationary spiral of low growth and high unemployment.

The ESRI has suggested a longer timeframe for the adjustment, as it now believes the level of savings required could be double the amount previously estimated.

It also believes the Croke Park agreement may have to be re-examined, given the scale of required savings.

In its latest quarterly economic commentary, the ESRI warns that trying to meet the 3% budget deficit by 2014 deadline could mean the Government taking so much money out of the economy that it damages economic growth - the very thing it needs most.

Commenting on the ESRI report, the Taoiseach said it was not feasible for Ireland to consider looking for an extension of the 2014 deadline for bringing the deficit down to 3% of GDP. Brian Cowen said this would increase debt and debt repayments.

A Department of Finance spokesperson said Ireland had agreed the target with other EU member states. The spokesperson pointed out that the ESRI had said: 'We accept that this date is almost certainly not going to be moved.'

The department said it was not realistic to extend the period of adjustment, and doing so could lead to a further rise in Irish borrowing costs.

Fine Gael finance spokesman Michael Noonan said the debate was 'futile' as Ireland had no choice but to stick to the 2014 target.

€15 billion of measures now needed - ESRI

In last December's Budget the Government estimated an adjustment of €7.5 billion would be required to meet the target. But since then higher bank bail-out costs and lower growth prospects have pushed that figure to as much as €15 billion, under the ESRI's low growth scenario.

It says cuts of that scale would reduce annual growth rates to around 2.25%, which are not high enough to reduce unemployment and produce sufficient tax revenues for a sustainable budget deficit.

To avoid this, the Institute suggests pushing the 3% deadline out to 2016.

However the European Commission has rejected calls for the 2014 deadline to be extended.

A spokesman for EU economics commissioner Olli Rehn said last night that only the European Council could change the four year target confirmed recently by the Irish Government.