The Government is determined to carry out its five-year austerity programme set out in Tuesday's budget, Taoiseach Brian Cowen has said in the face of Opposition criticism that the measures put too much burden on taxpayers.
Writing in today's Irish Times, Mr Cowen said he regretted the Budget would cause difficulties for some but insisted the measures had to be taken.
"Ireland has suffered a blow to her reputation abroad. This must be fixed and it will be fixed," he said.
In a year when the Government expects the economy to contract by around 8 per cent, Mr Cowen said he had to walk a fine line between taking too much money out of the economy and not taking enough.
"I believe the budget gets the balance right," he said.
Mr Cowen has won praise from economists for finally presenting a long-term plan for bringing the deficit from an expected 10.75 per cent of gross domestic product this year to below the European Union's 3 per cent limit by 2013.
But the emergency budget - the fourth attempt since July to stem the rise in the deficit - disappointed many economists and voters for not putting more emphasis on spending cuts instead of taxes that some say may deepen recession further.
Fitch Ratings, which on Wednesday became the second agency to strip Ireland of its "AAA" rating, praised the Government's resolve but said the tightening in the midst of a deep recession showed the cabinet's "lack of political flexibility".
"The budgetary strategy looks doomed to fail, because we have failed to understand that it is extremely difficult to tax one's way out of a recession," Friends First Chief Economist Jim Power wrote in today's Irish Examinernewspaper, adding that he was "angry and disillusioned" after reading the budget.
Analysts also warned plans for a new state agency to manage banks' risky loans could expose taxpayers to billions of euros of losses beyond the €3.5 billion of capital given each to Bank of Ireland and Allied Irish Banks.
The Government, which will take over the banks' entire property development loan books in exchange for government bonds, said the scheme could lead to it taking majority stakes in the banks but it wanted to avoid complete nationalisation.