Lower growth for next year will mean the government has to squeeze yet more out of hard-pressed taxpayers. Finance Minister Brian Lenihan also said Dublin planned to return to international bond markets for financing in January. 

Irish leaders have warned the country needs to significantly increase planned budget savings for the years 2011-2014 from earlier plans, as it battles to avoid the sort of debt meltdown that drove Greece to seek foreign aid.

“Achieving targets set for the deficit expressed as a percentage of GDP will require more savings because GDP will now be lower than previously forecast,” Lenihan told a banking conference.

He declined to give his new forecast for gross domestic product (GDP) growth next year.   He forecast growth of 3.3 percent for 2011 when he unveiled the 2010 budget but economists polled by Reuters expect 2.8 percent and the central bank has said its forecast of just 2.4 percent is in danger of being trimmed.

A finance ministry spokesman said the government now expected growth marginally above 0 percent for this year, down from earlier expectations of 1 percent.   Prime Minister Brian Cowen will meet leaders of the two main opposition parties later on Wednesday to try to forge a political consensus on how to get the country’s budget deficit, currently the worst in the EU, back to an EU limit of 3 percent of GDP by the end of 2014.

A deal would reassure investors that Ireland will remain on an austerity drive even if there is a change of government, as expected, next year.

“We are asking the opposition parties to participate in this process because part of the (issue of investor confidence)... is the uncertainty about what would happen would the other parties take over,” Lenihan told reporters at the banking conference.

The premium investors demand to hold Irish debt over benchmark German paper rose back to 400 basis points on Wednesday but Lenihan said he planned to go back to markets for more funding in January.

Ireland is betting it can borrow more cheaply next year — but the threat of political upheaval in the first half and poor prospects for cross-party backing for its austerity plans mean the window for tapping investors is small and closing.

An agreement to support cuts would boost the beleaguered government but restrict the policy options available to a new administration and junior coalition partners the Greens played down the chances of a deal on Wednesday.

Green Party leader John Gormley, who first touted the idea of talks with the main opposition parties, said he was under “no illusions” over the difficulty of achieving a consensus, which he had previously said was essential.

“It is difficult to reach consensus, particularly when you are talking to opposition parties who believe that it is their job to hold the government to account and their job to destabilize government and get into government,” Gormley told Irish radio station, Newstalk.

Cowen and Lenihan will unveil a four-year plan next month outlining how they will squeeze the deficit, which is expected to hit an eye-watering 32 percent of GDP this year due to the one-off inclusion of a slew of bank bailouts.

Dublin hopes the four-year plan will convince investors Ireland can tackle its deficit despite anemic growth and a bill for bailing out its banks that could hit 50 billion euros.