Worryingly, there are also signs of the beginnings of a 'brain drain' as some of the most important Irish talent is moving abroad to better-funded institutions.

"We are at a serious inflection point," says TCD Dean of Research, David Lloyd.

News that white-coated hotshots are preferring to move to South Korea, Germany or the US wouldn't usually raise an eyebrow. But it should. The new trend is enormously significant.

This represents an €8.2bn gamble that is beginning to look very shaky indeed. Under the National Development Plan, €8.2bn was earmarked to transform the country into a so-called Smart Economy. The money was to be spent on attracting some of the aristocrats of science to move their work and research to Ireland.

It was a hugely ambitious wheeze. Here's what it says on the tin. The universities and research centres were to be given billions to train up promising students. They become highly skilled. Ireland has PhDs coming out of its ears. Multinationals fall in love with us all over again. It's the Foreign Direct Investment equivalent of Cheryl Cole giving you the eye. . . and her phone number.

But unlike setting up call centres or cheapo computer assembly lines, the return on this €8.2bn investment comes in the distant future.

"It could be a 10- or 20-year exercise. New technology does not come about overnight. It's a long-term thing," says Frank Barry of NUI Galway's pioneering stem cell research outfit, Remedi Institute.

"Sometimes the science is ahead of what's happening in industry, so you have to wait for the payback," says Des Fitzgerald, vice president of Research at UCD.

But the initial signs were good. It seemed as if the €8.2bn scheme was working. The country was getting noticed for its innovations and groundbreaking discoveries.

"Last year was the first time that Ireland broke into the top 20 for citations in all fields of research," said Dr Lloyd. Elite scientists and inventors were queuing up to work in Ireland, with the 2008 Science Foundation Ireland census finding that about 45 per cent of key researchers working here were from abroad.

This had a major impact on multinationals setting up operations in Ireland. Five years ago, around 8 per cent of all IDA job announcements were in the R&D sector. Last year that figure had soared to 40 per cent. Research centres and projects provide "stickability" for multinationals, according to FDI sources.

Given that 80 per cent of Ireland's exports come from the multinational sector -- mostly from a handful of big-name companies such as Microsoft, Intel or Pfizer -- it is singularly the most important chunk of an otherwise hopelessly unbalanced economy. If the multinationals bail, we're going back to the Stone Age.

Science funding was on track in 2007 and 2008. But then it fell off a cliff. Funding is down 15 per cent from 2008 levels. In real terms, the drop is even bigger, as the funding had been expected to grow year on year. In effect, the 2009 outlay is around 26 per cent lower than what had been planned.

This is Sim City economics. When your sprawling metropolis hits the skids in the computer game Sim City, the first thing to go is the R&D budget until public finances return to health. While it works in a €49.99 PC game, the real world is a bit more complicated.

"What we've seen is that there has been a cut of 15 per cent in research and development across the board. It is affecting new grants and the renewal of existing grants. This will fall by 50 per cent," warns Professor Fitzgerald.

"Fundamentally, it's about the people. We need world-class personnel to train people at the highest level. It's really about the people more than specific technologies," says Peter Kennedy, vice president for Research Policy and Support at UCC.

Ireland's real strengths are in curing diseases, software development, food sciences and energy, says Professor Kennedy. These areas should be ringfenced from the chopper.

"If you lose people who are big stars but aren't aligned to that agenda, it's not critical. But if we lose core people then that's trouble," he warns. "The danger is that the state cuts back on areas that are strategically important to Ireland."

The Sunday Independent has learnt that up to 25 high-profile scientists and researchers had been targeted and approached by Irish universities. Grants for their employment had been approved in at least 19 of these cases. But the deteriorating economic situation and grim grant landscape has seen them change their minds. These hotshots had been earmarked to join research efforts in areas ranging from stem cell to semi conductors, and cancer treatment to cellular biology.

The Stokes programme was one of the tent-pole schemes of the smart economy. The idea was to attract 150 real game-changers and mould-breakers to Ireland by funding top research posts or professorships at universities. This programme has now been frozen. Seven top international scientists were interviewed and offered professorships or senior posts at TCD, according to sources.

UCD is thought to have had issues recruiting at least four professors and lecturers, with NUI Galway and UCC being knocked back by three apiece. The Royal College of Surgeons has also been affected. "Research funding uncertainty" was cited as a reason for turning down the offers by a number of the candidates.

"The research community globally is not that big. The confidence in Ireland will be eroded, making it harder to get people," says Prof Fitzgerald. "It's possible that people who have come here will have second thoughts."

"The attractiveness is becoming less because of the difficulties in accessing funding," says Dr Lloyd. "The best brains aren't necessarily geographical. We need to recruit people overseas."

"I suspect that we'll lose people to other countries," says Prof Fitzgerald.

He's not wrong. In recent weeks St Andrew's University and the University of Tasmania have lured top computer science talents from Ireland. University sources have indicated that other strategically sensitive staff have also been tapped to emigrate. Last week it emerged that a senior player in the environmental science arena was to take up an overseas posting.

"I haven't seen a flight of investigators but people are looking at Ireland and being more cautious," says Dr Lloyd. "Retention hasn't kicked in yet but it has the potential to be an issue. Researchers are very mobile."

"We have to face these challenges. We have to have high added value so we need highly skilled people. If you don't invest, there is no future," adds Prof Kennedy. "Realistically, a lot will emigrate but they will come back."

With state coffers as bare as a stoner's fridge, there simply isn't the money to keep funding the research effort. Last week's bombshell OECD report noted that despite improvements, Ireland's spending on R&D was low in relation to national income. The OECD suggested that local Irish companies should be prodded into action with tax credits and financial incentives to boost private sector spending.

Wastage could also be reduced through smarter funding. The method and structure for handing out grants for science and inventing stuff are plum bonkers.

There's an alphabet soup of agencies shovelling out cash. Apart from the flagship Science Foundation Ireland (SFI), funding also comes from IDA, EI, DCNER, HRB, IRCSET. Overlapping grant programmes are unavoidable through this system.

Colm McCarthy's An Bord Snip Nua suggested pooling together all the science and the research funding under one roof. Science Foundation Ireland could -- and probably should -- then be tasked with running the sector, rather than diverse bits of government departments and State agencies.

Movement on this is becoming more pressing. Insiders suggest that there is an extraordinary lack of joined-up thinking when implementing the budget and staff cuts.

Some research sectors are being hit far harder than others because of a lack of coordinated approach. With all eyes on bank bailouts and dodging public sector cuts, failure to address these issues and to starve the sector of funding is a real threat.

"We're trying to become a smart economy. What's the opposite of a smart economy?" asks Prof Kennedy. "That's where we'll be going."