The economy of Ireland is expected to shrink by up to 10% by 2010.
Prime Minister Brian Cowen told parliament on Wednesday that Ireland was being "battered by international storms the like of which this generation has never seen."
Previously known as the Celtic Tiger for its booming economy from the 1990s, Ireland has been hit by a domestic property market slump, a banking crisis, high unemployment and the worst retail sales figures in 25 years.
At the start of a two-day debate on the economy, Mr Cowen said the economy contracted by close to 2% last year.
He warned there was a prospect of up to 100,000 more job losses by next year.
He told parliament the government has reached agreement with employers and unions over the need to save two billion euros in public spending this year.
This will be a first step in efforts to stabilise national finances over five years which will involve a total saving of about 15 billion euros.
Ireland entered recession during the first half of 2008.