Mr Kenny said the country is spending €16 billion a year more than it is taking in.
Public spending must be cut by €2.2 billion with 23,000 civil servants being axed over the next three years.
Income tax will stay the same – but indirect extra taxes will raise €1.6 billion. VAT will jump to 23% and motor tax will be upped.
Mr Kenny said Budget 2012 “will be tough”, and that “it has to be”.
The Taoiseach also said 50 quangos will be abolished or merged with other organisations – and he will go ahead with a referendum to abolish the Seanad next year.
The mistakes which brought the country to this point “must never be allowed to happen again” he said.
Former Taoisigh Bertie Ahern and Brian Cowen will lose perks like mobile phones and staff, he said.
Meanwhile Transport and Tourism Minister Leo Varadkar, asked for a response to revelations in the Mail on Sunday that Mr Kenny had sanctioned a €35,000 increase for one of his special advisors, he said: “What the government has done….is to reduce pay for ministers and to reduce pay for advisors and a lot of money has been saved for the taxpayer by introducing those measures.”
“In a few cases, increases have been given where somebody has come from the private sector, or from outside the political system or the civil service system, and is effectively taking a pay cut in order to take up their new job.”
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