GALWAY, Ireland (Reuters) - Controversy over Irish Prime Minister Brian Cowen's alcohol consumption overshadowed his efforts yesterday to reassure colleagues and voters that he is tackling the country's financial woes.

Fears that the former "Celtic Tiger" economy –is on the verge of a full-blown debt crisis have sent its borrowing costs soaring, and Dublin needs to slash the worst deficit in the European Union to reassure investors and bring yields down.

But Cowen's efforts to drum up public support for yet another round of cutbacks backfired when his hoarse performance on the flagship morning radio show triggered a flurry of comment on Twitter that he was feeling the effects of a boozy night.

One opposition politician tweeted that Cowen sounded "halfway between drunk and hung over." The prime minister flatly denied the accusation.

"I think it's a real new low in Irish politics," he said during a final news conference at his parliamentary party's annual conference.

"It's an appalling and unfounded assertion," he said, cabinet members flanking him in a show of support.

"I have a hoarseness in my throat for which I apologise."

Renowned for his gruff public persona, Cowen traditionally lets his hair down at the annual conference with ballad songs and pints of beer into the small hours.

But headlines about a party-time Taoiseach (prime minister) are the last thing the government needs as it seeks to squeeze more cutbacks out of a badly stretched electorate and convince investors that Ireland is not on the rocks.

"This is an exhausted man running an exhausted government. For me, this is just another example of why we could really do with another election as soon as possible," said David Farrell, professor of politics at University College Dublin. "He is a person who is clearly under a lot of stress and strain and this is revealed by this morning's very poor performance."

Although there is unease within Cowen's own Fianna Fail party about his leadership, would-be challengers are reluctant to pounce given the difficult measures that need to be taken in the budget, and the prospect of electoral annihilation.

The next parliamentary election is scheduled for 2012 but political analysts have said the government is likely to fall before then, particularly if by-elections for three vacant seats are held early next year.

The cost of propping up the banking sector after a disastrous property binge is expected to blow out Ireland's budget deficit this year to a jaw-dropping 26 percent of Gross Domestic Product, Goodbody Stockbrokers has estimated. Even without the one-off cost of dealing with its banks, the shortfall is still set to be around 10 percent next year on an underlying basis, over three times an EU limit of three percent, according to the latest Reuters poll.

Cowen tried to soothe taxpayers' fears over this year's budget by telling the Morning Ireland radio show that the savings required would be less than last year's 4 billion euros.