After another grueling week on the markets during which the spread on Irish 10-year bonds hit record highs before narrowing on Friday, the prospect of a bailout for Ireland has never been closer. By the end of the week European policy makers were reportedly urging the government to take emergency aid to contain the debt crisis rattling the entire eurozone. But Taoiseach Brian Cowen and finance minister Brian Lenihan appeared to be gambling on a last roll of the dice with the forthcoming austerity budget for 2011 and their four-year plan to bring the deficit under control.

The government is now in a race against time to convince investors that its rescue plan for the economy, which involves hacking€6bn out of the budget next year and €15bn from public spending over the next four years, will shrink the exploding bond spreads and allow the NTMA to return to the markets for more borrowing early next year.

The soothing words of EU economy czar Olli Rehn, who was in Dublin early last week to meet Department of Finance officials, weren't enough to allay the fears of international investors that Ireland will not be able to stabilise its public finances without outside assistance.

Central bank governor Patrick Honohan arguably made matters worse on Wednesday when he uttered the dreaded acronym "IMF" when innocuously explaining that the country was already doing everything that would be asked of it in a bailout situation.

European officials and market sources alike now believe a bailout is on the cards, according to anonymous leaks from Frankfurt and Brussels, even as Dublin denies the game is up. According to reports late on Friday, the government had begun exploratory discussions with European institutions regarding the possible terms of any emergency funding package.

"It seems difficult for Ireland to avoid tapping the fund unless they have new rabbits to pull out their hat," said Julian Callow, chief European economist at Barclays Capital in London.

The publication of the four-year economic framework, detailing how the government will slash spending and raise additional tax revenues to stem the runaway budget deficit, is just one of several key events coming up that will determine Ireland's economic future.

Can the country overcome the worst economic crisis it has ever faced, or will the government have to seek the help of the European Financial Stability Fund (EFSF)?

16 November

The Eurogroup of Finance Ministers meets this Tuesday and Ireland's debt problems will be top of the agenda. Market rumours last Friday predicted this would be the day the terms of any bailout would get hammered out. Any request for aid must first go to the Eurogroup, headed by Luxembourg prime minister Jean-Claude Juncker.

Even if the outlines of a rescue package are agreed in principle, it may not be activated immediately if Cowen and Lenihan can persuade their European partners to give them time to convince bond investors that Ireland's finances can be brought under control.

"The more time elapses, the bigger is the chance that the results of fiscal policies will show," said Holger Schmieding, chief economist at Joh Berenberg Gossler in London. "The more time elapses before a country taps the fund the better."

22 November

The final details of the four-year deficit reduction plan are likely to be published. While the economic assumptions underpinning the plan have been released already, the public will finally get sight of the deep cuts to public services and tax increases to be implemented over the next four years.

About €6bn worth of savings and tax rises are due to be announced in December and the plan will provide the targets needed to reduce the deficit to no more than 3% of economic output by 2014, as required by the EU's Stability and Growth Pact.

The government has pinned its hopes on convincing debt investors that the country has a credible route back to fiscal health, which should reduce borrowing costs. However, the reaction among bond traders is likely to be more muted as they pore over the details. If there is no immediate downward movement in the bond market the country may ultimately have to make a call on the €750bn EFSF.

25 November

Never before have the voters of Donegal South West held so much power or the attention of the world's financial markets. The by-election to replace Pat The Cope Gallagher finally takes place and it looks almost certain to go against Fianna Fáil.

The bookmakers have installed Sinn Féin candidate Pearse Doherty as favourite to take the seat, which would cut the government's wafer-thin majority ahead of the budget. A thumping defeat for Fianna Fáil will also heap pressure on the leadership of Taoiseach Brian Cowen within the party.

With Olli Rehn calling for consensus and bond markets jittery about political stability and the government's capacity to carry out fiscal reform, the upheaval being caused by this by-election could not come at a more sensitive time.

2 December

Exchequer returns will give the latest tax figures for the key month of November, when the bulk of corporation tax and returns from the self-employed are filed. Any sign of further deterioration in tax revenues will force a last-minute rewrite of the budget.

Then again, the government could get some unexpected good news. Last month's returns showed a jump in corporate tax receipts which offset further declines in income tax.

7 December

This is the big test, both economically and politically. After the traditional photocall on the steps of Government Buildings holding a copy of the budget, Brian Lenihan will make the short walk to the Dáil chamber. At about 3:30pm he will begin speaking.

A year ago, Lenihan proclaimed the worst of the recession was over and the economy had turned the corner. He will be forced to admit that his initial growth forecasts were wrong and the bailout of the banking sector is costing more than anyone ever envisaged.

This is the moment of truth for nervous government backbenchers and the key independents now propping up the coalition. The fate of the budget rests on their decision: vote with the government and pass the most painful budget in the history of the state, or reject it and collapse the coalition, forcing an election in Christmas week and further turmoil in the markets.

8 December

The European markets will give their reaction to budget early. If the budget is passed, expect only a slight movement in the yield until NTMA and Department of Finance officials host conference calls with bond desks in key financial centres in Asia, Europe and the US to offer reassurance that the government can follow through on the measures.

If the budget is rejected by the Dáil, European markets will be plunged into chaos. Bond-holders will dump Irish paper, sending yields soaring to the levels faced by Greece before its bailout. Bonds in other struggling eurozone nations such as Spain and Portugal will also slump and the euro will fall against the dollar and sterling, causing a nightmare for the EU and European Central Bank. Contingency plans to provide a rescue for Ireland will most likely be activated at this point.

"The chances are rather big that at some point they need to ask for financial assistance just to calm down the situation," said Aline Schuiling, an economist at ABN Amro Bank in Amsterdam. "There will have to be a solution."

If the government can see out these key events it will set the stage for the NTMA's foray back into the bond market early in 2011. With the country running out of cash by the middle of the year it has just months to sway international opinion in Ireland's favour. If not, then a rescue package put together by the EU, with IMF input, is the only likely outcome.

Additional reporting by Bloomberg