The Government is to put the revised European Union fiscal compact treaty which tightens controls on member states' budgetary decisions to a referendum, Taoiseach Enda Kenny told the Dáil this afternoon.

The compact, agreed at special EU summit last month, proposes tough new budgetary discipline on each euro zone state, including near-zero public deficits. Twenty-five of the European Union's 27 countries have signed up to the new treaty, with only Britain and the Czech Republic opposed.

Mr Kenny told the House that the Attorney General's advice at this morning's Cabinet meeting was that "on balance", a referendum was required to ratify it. Scheduled Dáil business was interrupted for the statement.

The Taoiseach said that he intended to sign the treaty at the weekend with all the heads of the EU in Brussels. In the coming weeks, he said the Government would finalise the arrangements and the process leading to the referendum, leading to the establishment of a referendum commission. No date was given for the poll.

"I am very confident that when the importance and merit are communicated to the Irish people that they will endorse it emphatically by voting yes to continuing economic stability and recovery,” the Taoiseach said. “I believe it is in Ireland’s national interest that this treaty be approved."

Mr Kenny has previously denied the compact will condemn the State to further years of austerity.

Tánaiste Eamon Gilmore said the referendum would come down to a vote for economic growth and stability.

"We now have an opportunity to go beyond the casino capitalism," he said.

Fianna Fáil leader Micheál Martin criticised the Government for notifying the Opposition eight minutes before the Taoiseach's announcement. "I think it's the right decision and one that shouldn't have required legal advice in my view," he said.

Sinn Féin and a number of left-wing TDs opposed to the treaty had indicated their intention of issuing a court challenge if a referendum was not held.

Sinn Féin leader Gerry Adams said it was another failure by the Government, which had tried to avoid the referendum. "The question is will the Government accept the outcome? Are we going to have the usual re-run replay?" he asked.

Irish voters rejected the Nice referendum in 2001. It was passed following a re-run in October 2002. The Lisbon referendum was rejected in 2008, before being passed a year later after Ireland secured a number of concessions.

But Mr Gilmore later said this referendum would be different as the treaty only requires 12 member-states to ratify it.

“A second chance doesn’t arise in this case there’s one go at it…and it will be a matter for the people to decide,” Mr Gilmore said.

The Green Party said it would seek support for a Yes vote on the referendum, with leader Eamon Ryan saying the measures provided for in the fiscal compact was in the national interest.

Support for the European Union has cooled in Ireland following the financial crisis, meaning there is no guarantee a vote will succeed. A rejection could damage Dublin's long-term funding prospects and cast doubt on the country's commitment to the single currency.

In December, Minister for Finance Michael Noonan said a vote on the treaty would effectively be a vote on Ireland's membership of the euro.

Rejecting the treaty would also bar Dublin from accessing the European Stability Mechanism (ESM), the permanent successor to the euro zone's current rescue fund which Ireland is tapping as part of an EU-IMF bailout that runs until the end of 2013.

Last week, Germany's minister for European Affairs Michael Link confirmed that European Union negotiators sought to design the fiscal compact in such a way to avoid a referendum in Ireland.