On the day Ireland was meant to be commemorating the 90th anniversary of the state's foundation the country's finance minister delivered an austerity budget that reflected the Republic's continued reliance on the EU financial life-line.

Michael Noonan outlined details of the €1.6bn (£1.4bn) in tax rises and other charges needed to drive down the country's huge deficit.

The minister said the Fine Gael-Labour coalition's plan was to drive down government debt as a proportion of Irish GDP from 10.1% presently to 8.6% by next year. The programme is linked to the multibillion-euro IMF/EU rescue plan that the last Irish government secured last year.

While Noonan told the Dáil there would be no rise in income tax, he has raised VAT by two percentage points. Taxes on interest earned from savings, the so-called DIRT (deposit interest retention) tax, will rise from 27% to 30%.

On day two of the budget – the first time in the Republic's history the nation's tax and spending programme has been strung out over 24 hours – Noonan emphasized the Irish government's refusal to increase personal taxation.

"Wages and salary in January will be no less than wages and salaries in December," he told the parliament.

VAT rises to 23% – a move that may benefit businesses across the border in Northern Ireland where VAT rates are lower.

An extra 25 cents was put on a packet of 20 cigarettes but alcohol remained untouched following lobbying by the drinks industry in Ireland. The industry is concerned at rising pub and off license closures in the face of high prices and the impact of cheap supermarket sold drinks.

But 300,000 low-paid Irish workers benefited from a change in the universal social charge. Those earning just over €10,000 will now be exempt from the charge as a result of the budget.

Noonan insisted that the Republic's low corporation tax (12.5%) would remain unchanged despite continued charges of unfairness from Ireland's European partners in particular French president Nicolas Sarkozy.

With the critical EU summit looming over the horizon on Friday the prospect of yet another referendum in Ireland on European integration and possible fiscal union becomes a possibility. The overall mood in the Republic is one of stoicism in the face of yet another tax rise and cost cutting budget. In these circumstances it is likely the population will put up little resistance to Angela Merkel's designs for a more fiscally united, financially frugal EU even if it entails yet another loss of the kind of economic sovereignty achieved in 1921.