The Economic and Social Research Institute is recommending that the Government go ahead with its plans to cut 3.1 billion euro from next year's budget.
In a report published this morning, the ESRI says easing up on austerity after this year's budget could mean fewer cuts in the years ahead.
The report said if the Eurozone emerges from the current debt crisis, the Irish economy could return to its normal growth rates of around 3.5 per cent a year.
That would mean that the current high level of unemployment could halve by the end of the decade.
Professor John Fitzgerald of the ESRI said easing up on austerity now could cause problems down the line.