Irish Government ministers are taking a 10 per cent pay cut in a “patriotic” bid to pull the country out of its vertiginous plunge into recession.

The announcement was made by the finance minister, Brian Lenihan, as he delivered his budget two months earlier than originally planned. It was brought forward because of the economy’s dramatic deterioration.

The Fianna Fail-led coalition government slashed spending and raised taxes by 2 per cent for those earning more than €100,000 per year. Even so, Mr Lenihan said he expects the 2009 budget deficit to be more than double the European Union limit.

The new "income levy" of 1 to 2 percent (1 per cent for those earning less than €100,000) was the central plank of a budget which also introduced an air travel tax as well as increases in taxes on gambling, cigarettes and alcohol.

However, Ireland’s corporate tax rate of 12.5 per cent was maintained, with Mr Lenihan describing it as “a cornerstone in our industrial development in the last decade”.

He said: "I want to emphasise that this rate of tax is not for changing upwards and it will continue to be a central part of Ireland's economic brand."

French President Nicolas Sarkozy is known to want a European Union-wide corporate tax rate, removing Ireland’s advantage in attracting international companies to use it as an entry point into Europe.

Mr Lenihan said he expected Ireland's public deficit to hit 6.5 per cent of gross domestic product in 2009, well above the 3 per cent cap set by the EU's Stability and Growth pact, and debt to reach 43 per cent of GDP.

"A substantial increase in borrowing is unavoidable if we are to minimise the impact of the tighter fiscal position on the economy," he told the Dail.

An abrupt collapse in the once-thriving property market and global market turmoil has pushed the former 'Celtic Tiger' into its first recession in 25 years, ending more than a decade of economic boom and triggering a steep fall in tax receipts.

Government data at the weekend showed that, on a pre-budget basis, the 2008 exchequer deficit was set to rise seven-fold to €11.5 billion from €1.6 billion at the end of 2007, before hitting €14.8 billion in 2009.

"It is my intention to secure a progressive reduction in the deficit as a percentage of GDP in 2010 and 2011," Lenihan said, struggling to be heard over the heckles of opposition deputies, who accused him of making a bad situation worse.

"You have made decisions today that will threaten to turn a recession into a depression," said Richard Bruton, deputy leader of the main opposition Fine Gael party.

But the pay cut for ministers will go down well across the country. Some senior civil servants are taking a similar voluntary cut.

"As a small open economy, we are especially vulnerable to economic shocks beyond our shores," said Mr Lenihan.

"The international credit crisis has compounded and deepened the downturn in the construction sector and led to a fall off in consumer confidence."

A €10 air travel tax, which will come into effect from 30 March, will apply to all Irish airports.

There will be an increase in the standard rate of VAT by half a point to 21.5 per cent from 1 December, but no change in the zero rate which applies to food, children's clothes and footwear.

The budget provided an opportunity "for all of us to pull together and play our part according to our means," Lenihan said, describing it as "no less than a call to patriotic action".

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