John Gormley said the country must make a wholesale change to a sustainable economy if it is to meet future challenges, as he warned next year’s budget to be unveiled next month will be “very tough”.

He said: “We must be solvent both financially and ecologically. It will not be easy but we must undergo a transition to a sustainable economy.

“Our taxation system, our regulatory systems, our public spending, all must support this transition.”

The Green Party leader was speaking in a Dail debate on the pre-budget outlook last Tuesday (November 17) as a shrinking economy and rising unemployment leave Ireland faces stiff spending cuts.

Mr Gormley revealed the country costs 58 billion euros (£52 billion) a year to run but there is just 32 billion euros (£29 billion) in collected tax revenue.

It is borrowing 400 (£361) to 500 (£451) million euro a week ‘just to stand still’, he deficit is four times above European Union membership rule limits, he explained.

“This forthcoming budget is going to be very tough,” he said: “But we are working with our partners in government, in preparing for this budget, to make the cutbacks as fair as possible.”

Reforms are needed if Ireland is to meet them such as changes to the planning system, projects to supply more energy from renewable sources and a carbon levy, which he revealed would be in the forthcoming budget

“We need a carbon levy because we need to change our behaviour, using less energy and using it more efficiently,” Mr Gormley said.

“We need it because we need to tackle the disastrous effects of climate change. We need it because it is a common sense policy now being adopted in so many key western economies.”

But some fear the carbon levy is simply revenue raising energy tax Mr Gormley has sought to reassure them insisting it will be revenue neutral and boost the economy, creating jobs and stimulating businesses by encouraging efficiency

“Again we will work to ensure that it is fairly applied,” he said “Proceeds will be ring-fenced to ensure it does not add to fuel poverty and ensure that energy efficiency projects are promoted.”

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