The decision was made at a Horse Sport Ireland board meeting on Thursday.
Horse Sport Ireland Chairman Joe Walsh said that the decision was an acknowledgement of the changing fiscal climate and the need for HSI to concentrate its resources on developing the sport.
Mr Walsh said that Horse Sport Ireland had a recent meeting with the Minister for Arts, Sport and Tourism Martin Cullen T.D. At the meeting an initial feasibility study that had been prepared for Horse Sport Ireland by Mazars Consulting was discussed. From the report it was clear that substantial Government and commercial funding would be required to bring the games to Ireland.
"We had a very open discussion with the Minister and while we all agreed that hosting these games would be of great benefit to Ireland we cannot ignore the economic realities," he said.
"As the Governing Body for the sport we have to be prudent and be absolutely sure that the games would be viable. With the global economic downturn the risk factors in taking on a project like this have increased significantly in recent months. We all know what happened in 1998 and we cannot risk a repeat of that." he said.
Mr. Walsh said he wanted to thank Dr. Pearse Lyons, Global President of Alltech, for his generous offer to sponsor the Games.
"As an Irishman Dr Lyons really wanted to bring the games to Ireland. His offer to be the title sponsor of the games was extremely generous and it is unfortunate that the timing just isn't right," he said.
He said that he was confident that Ireland would bid for the World Equestrian Games at some stage in the future and the work done in assessing the feasibility of a bid for 2014 would prove useful.
Bidders for the games are to be circulated to the FEI Bureau. Bidders will be asked to make a formal presentation prior to the decision by the Bureau on the host Organiser, which will be taken in the spring of 2009.