IBEC has recommended the Government cut public sector pay and social welfare rates in the emergency Budget next week.
The April 2009 Supplementary Budget is the first in a series of budgets required to address the deficit in the public finances, according to the business group.
On a pre-budget basis, IBEC forecasts that the Irish economy will contract by 7.5% in 2009 and the General Budget Deficit will be 12.5%.
The group said the Government must not over-react, however, to the current deterioration in tax revenue by introducing measures which will excessively contract economic activity.
It must strike a balance between its efforts to stabilise the public finances and the need to sustain activity in the real economy.
IBEC said that a reduction of €3bn in net terms is the most the Irish economy can bear at the current point in the business cycle with two thirds of this coming from spending reductions and a third from tax increases.
Among the moves IBEC recommends is:
A 9% cut in public sector pay and pensions and on the provision of current services - yielding a gross saving of €2.1bn for the remainder of 2009.
Social welfare rates should be adjusted in line with changes in the cost of living and should therefore be reduced by 3%, resulting in savings of €400m this year.
The existing income levy should be adjusted so that it yields an additional €1.2bn for the rest of the year.
There should be no increases in corporation tax, employers PRSI , excise levies or VAT.
A reallocation of €1bn should be made from the NDP to a programme to support employment in enterprise.
In addition, IBEC believes that any increases in VAT or excise would incentivise cross-border shopping and would be counter-productive from a tax revenue perspective.