The Government may be forced to review the national pay deal in the New Year, Taoiseach Brian Cowen has told the Dáil.
Under the national pay deal agreed in September, public sector workers are scheduled to receive a 3.5 per cent increase next August as part of a 6 per cent phased over 21 months.
Speaking in the Dáil after meeting with the social partners earlier in the day he gave his strongest indication yet that the public finances may not be able to afford the pay rises agreed in the national wage deal.
He told the Dáil: "The question of the social partnership process, taking into all account all Government expenditure programmes to deal with the deteriorating public finances, is a matter which the social partners will be involved in during the coming weeks."
He added: "I have refused to isolate the pay issues from all the other issues. All Government expenditure has to be looked at in that context."
Earlier, the Taoiseach asked the social partners to engage with the Government in drawing up a new national economic recovery plan.
At a two-hour meeting at Government Buildings today, Mr Cowen told unions, employers, farmers and social organisations that the Government's income is currently at 2005 levels while expenditure is at 2009 levels.
It is understood that no specific details of the Government's proposals for economic recovery were given to the social partners at the meeting.
Government representatives are expected to hold further talks with the social partners within the next few days.
Ahead of today's meeting with the Taoiseach, the employers body Ibec said the issue of increasing the national minimum wage should be placed on the back burner
Ibec’s director general Turlough O’Sullivan said the national minimum wage was “a big issue” and that it impacted on competitiveness.
Jack O’Connor, the leader of the State’s largest union Siptu said he disagreed with any suggestion that the national minimum wage should not be increased.
Mr O’Connor said such suggestions represented evidence of further attacks on the most vulnerable people as a means of asking them to carry the burden of the economic downturn.
This coming Friday is the deadline for social partners to make submissions on whether the national minimum wage should be increased.
Mr O’Sullivan said the key message that Ibec was sending was that the Government needed to get its house in order and to adjust it spending to the new reality that its income had fallen through the floor he also said the Government should seek to “invigorate the economy to the maximum extent” through investment in the national development plan and in areas such as education.
He said that the enterprise sector was the only way out of the current situation.
Mr O’Sullivan said the new pay deal was a very flexible agreement and that already many employers were availing of its terms to seek longer pay pauses and greater value for money. However he warned that 2009 “would be a very difficult year” and that all the indications were that there would be further significant job losses.
Mr O’Connor said there was no reason for the new pay deal to be raised as part of the govt recover plan he said the amount involved “was small fry in terms o the money currently being thrown about”.
He suggested that Siptu would broadly agree with suggestions that the Government was proposing to invest in areas such as research and development and socially sustainable infrastructure.
Jerry Shanahan of the trade union Unite said that he would be raising the issue of the proposed bank recapitalisation scheme and he warned against large scale job losses as part of any consolidation of financial institutions.
The conference of religious in Ireland Cori warned that any economy recovery programme had to protect the poor and vulnerable in society.
Father Sean Healy said this had not been a characteristic of government initiative proposed to date.
The Government's recovery plan includes already-flagged decisions to accelerate the construction of school buildings, and to insulate hundreds of thousands of homes, along with major research and development (RD) tax breaks for Irish and foreign-owned industries.
A decision on a date for the formal publication of the Plan for Economic Renewal, which has been in gestation for some weeks, has not yet been made, and it could still be unveiled before the Christmas break.
The detail of the package was discussed at an afternoon Cabinet meeting in Farmleigh yesterday.
The Government's economic plan preparations have caused considerable confusion, with different signals being given about whether it would be published this week or next month. Venture capital funds and institutional investors will be offered incentives to back small Irish-owned firms, in a move designed to ease the current credit crisis. Actions to accelerate ties between such companies and leading multinationals will be accelerated.
The plan does not, so far, include proposals to sell off State assets, or to take immediate action against civil and public service pensions, though longer-term changes will be hinted at in today's meeting with the social partners.
The focus on extra R&D tax breaks has been adopted by the Government in the face of European Union rule changes which will make it more difficult, or impossible to give grant aid to foreign companies setting up in the midwest and southwest.
The Government's basic aim is to replicate the success of the International Financial Services Centre in Dublin in the R&D arena, creating potential to establish Ireland as a global centre for RD.