Cowen's announcement will mark the end of his tumultuous time as premier, during which he was criticized for mishandling a financial crisis that sent shockwaves across the euro zone and forced the former "Celtic Tiger" economy to seek a bailout.

Cowen had promised to dissolve parliament once the finance bill, the last piece of legislation underpinning the 2011 budget, had passed both houses of parliament, paving the way for an election probably on February 25.

The lower house passed the finance bill on January 28 and it has now moved to the Senate, or upper house, for approval.

The bill's passage means Ireland will meet its goal, under the US$116 billion EU/IMF deal agreed late last year, of delivering a record austerity budget by the end of March targeting 6 billion euros in spending cuts and tax rises.

This will incense voters, who already have years of austerity under their belts after a property bubble and reckless lending by the banking sector left the country with a massive debt and one of the biggest budget deficits in Europe.

The new government is likely to be a coalition between the center-right Fine Gael party and center-left Labour, which will have to abide by fiscal commitments given to the EU and IMF, as well as impose austerity budgets for the next few years.

Opinion polls suggest Fianna Fail, which elected former foreign minister Micheal Martin party leader earlier this week to replace Cowen, could lose at least half its seats in the election.