The Irish Government will test the economy and the public’s patience with another €3.5 billion dose of austerity yesterday, though better service sector and jobless data will help soften the blow.

Bailed-out Ireland has begun its return to bond markets and is one of few eurozone countries to keep eking out mild growth, but with one of the highest budget deficits in Europe, it must make further harsh spending cuts and tax hikes.

The new measures come on top of €25 billion taken out of the economy since 2008 – equivalent to 15 per cent of annual output – although the rapid rate of services growth last month showed its ability to weather the cuts as well as the eurozone downturn.

With the sector, which accounts for about 60 per cent of the economy, growing at its fastest pace in five years and the jobless rate hitting a 17-month low, Prime Minister Enda Kenny said the Budget would further pave the way towards exiting EU/IMF aid as scheduled next year.

“Everybody in this country knows that we face a very challenging time,” Kenny told Parliament. “We are moving in the right direction. Tough decisions must be made in the interests of all our people because our ambition is to retrieve our economic independence and be able to see the troika go home, and today’s Budget will build on that platform.”

The broad thrust of the Budget is already agreed under the terms of Ireland’s €85 billion EU/IMF bail-out, with around €1 billion coming from new tax measures, €500 million to be trimmed from the country’s capital budget and €1.7 billion to be saved through cuts to departmental current expenditure.