It would be difficult for Ireland to remain in the euro zone if its voters rejected a proposed new fiscal treaty, its European Affairs minister said on Monday, raising the stakes in a political battle over whether to put the plan to a referendum.

European leaders are expected to agree to tighten budget rules on Monday, seeking to regain market confidence in the public finances of the 17 countries sharing the euro after three, including Ireland, had to seek international bailouts in a crisis that now threatens major economies such as Italy.

Irish citizens have twice rejected changes to EU treaties before voting through amended versions.

It would be a very sad day if we somehow decided to opt out of that (new treaty) and allowed the other 16 members of the euro zone to progress and try to find a solution without us, junior minister Lucinda Creighton told state broadcaster RTE.

I think it would make it almost impossible for us to continue as part of the currency union because being part of a currency union means you have to abide by the rules, Creighton said.

The government has rubbished opposition suggestions that Ireland should leave the euro zone rather than continue to endure savage spending cuts, saying an exit would have catastrophic consequences for the economy.

Ministers have indicated they would prefer to avoid a referendum on the treaty fearing it would be rejected in a backlash against austerity.

Creighton said the government was happy with the treaty in its current draft.

If we were to open it up substantially today, it could cause problems ... we are pretty satisfied with the text as it stands, she said.

The government will take legal advice on whether to hold a referendum on the treaty once it is finalized, a process that is likely to take weeks.

Opposition parties say they would demand a referendum either way.

A poll last week showed that 72 percent of voters wanted a referendum to be held and indicated voters would narrowly back the treaty, but a quarter of those questioned said they were still undecided.

(Reporting by Conor Humphries; Editing by Ruth Pitchford)

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