AN INDEPENDENT economic think-tank has demanded that the Government take a tough stance ahead of its meeting in Farmleigh and would have to take more than €7.5bn out of the economy.
The Cabinet meets today for a special session that will be dominated by preparations for December's Budget.
However, the Economic and Social Research Institute (ESRI) warned that the cost-cutting measures are vital if the Government is to eliminate the State's deficit by 2015.
In a report called Recovery Scenarios For Ireland, the ESRI estimates that employees of the State will drop by 40,000, which would be "largely achieved through natural wastage".
And it said the burden of the €25bn bail-out of Anglo Irish Bank and Irish Nationwide will stunt growth.
Also on the issue of the banks, the think-tank said that the Government would have to force them to lend to businesses or face a decade of low growth, high unemployment and crippling debt.