Lenihan says that all government departments - with the exception of Health and Education - will be required to reduce their departmental payroll by 3% by the end of 2009.
The Minister also put on hold further acquisitions of property for the controversial government decentralisation programme, which was one of the favourite ideas of the former Minister for Finance and current Irish EU Commissioner Charlie McCreevy.
Planned pay increases for ministers, senior judges and civil servants will not go ahead, but the matter will be reviewed in September 2010.
The costs of our never-ending tribunals will also be reviewed, so that expenditure is minimised.
Brian Lenihan says that with these steps the government is hoping to save € 440 million in 2008, and a further € 1 billion in 2009.
He also announced that spending on consultancy, advertising and public relations would be cut by at least 50% in 2009, and significantly curtailed for the rest of this year.
State agencies will be reviewed, to see if they can share services, amalgamate or be abolished. The review's outcome is to be considered in the autumn.
Further savings of € 45 million will come from a cut in this year's Overseas Development Aid budget.
The Departments of Finance and Health & Children are to draw up a scheme to reduce surplus staff in the Health Servide Executive (HSE) as soon as possible.
All departments have also been told to stay within their annual budget.
The Cabinet has met today to agree on these measures. On his way into the meeting, Brian Lenihan said that he had "very constructive talks" regarding his cost-cutting measures. More cuts and savings are expected in December, when the new minister will present his first Budget.