The Government has said it plans to take measures totalling €6 billion in the December Budget as the first step in its efforts to bring the deficit in line with EU targets by 2014.
This is almost double the amount Finance Minister Brian Lenihan signalled in last year's Budget.
The figure came in a Department of Finance note which outlined the framework for its four-year plan to cut the budget deficit. The note did not say how the €6 billion would break down, but said 'the majority' of the adjustment would come through spending cuts rather than tax rises.
The European Commission said the Government's target for Budget 2011 was 'appropriate' and it welcomed the Government's decision to keep the public finances on a sustainable path.
In a statement, EU Commissioner for Economic and Monetary Affairs Olli Rehn said he welcomed the Government's 'continued commitment to reducing the deficit to below 3% by 2014'.
The note appeared to have little immediate effect on bond markets, where Ireland's cost of borrowing remained near record highs.
The Government plans to publish its detailed four-year budgetary plan later this month, with the Budget coming on December 7.
Last week, the Government said it would need to bring in spending cuts and tax increases totalling €15 billion over the next four years to meet targets agreed with the EU.
Minister Lenihan had said that there would have to be 'significant front-loading' of this figure - meaning he wanted to do as much as possible as quickly as possible. The Minister said today that this would underline the strength of the Government's resolve and show that it was serious about tackling the public finances.
2.75% a year growth being assumed
The €6 billion figure is aimed at cutting the deficit to between 9.25% and 9.5% of economic output next year. The target is 3% by 2014. The Department of Finance is basing its figures on average economic growth of 2.75% a year from 2011 to 2014.
The department's note says consumer spending in Ireland is likely to remain flat next year, with investment set to fall by another 6%. But exports are expected to grow by 5%, giving an overall GDP growth figure of 1.75%.
The note says consumer prices will rise modestly - by just less than 1%, while the unemployment rate will average 13.25%. The Government expects emigration of 40,000 next year.
The department says this year's underlying deficit is expected to be €19.25 billion, or 11.9% of GDP. When the costs of fixing the banks is taken into account, the deficit will be 32%.
For 2012, the note envisages measures of €3-4 billion, with €3 billion to €3.5 billion in 2013 and €2 billion to €2.5 billion in 2014. The figures are based on an assumption that two-thirds of these measures will come through spending cuts, the rest through tax.
Bank costs: no interest payments for next two years
The department also published a separate note on the implications of the €31 billion it has committed to providing to the banks in the form of promissory notes. The Government will borrow €3.1 billion a year until the full principal sums and interest payments have been paid in full, which will take between 10 and 15 years.
But the department has said no interest on the money it borrows will be recorded in the public finances in 2011 and 2012. The cost of interest repayments will then reach around €1.75 billion in both 2013 and 2014, before falling gradually over the following 10 years.
Borrowing costs stay near highs
Ireland's cost of borrowing remained high this evening after the publication of the Government's update on its plans to cut the budget deficit.
The interest rate demanded by investors to lend money to Ireland for ten years stood at 7.82% on the bond markets this evening, little changed from levels earlier in the day. But the closely watched gap between Irish and German borrowing costs widened further to 5.4 percentage points. Ireland does not plan to borrow on the bond markets until next year.