The leader of the Labour Party Mr Pat Rabbitte, has accused the Tanaiste, Ms Harney, of a "cynical U-turn" in relation to Government borrowing.

Mr Rabbitte said recent comments by Ms Harney suggested the PDs now agreed borrowing would be correct and fiscally prudent in the current climate.

Last Friday Ms Harney called for a relaxation of the EU Stability and Growth Pact to enable the Government to borrow more money to fund capital projects. She said it was essential that the rules governing fiscal policy should be seen to work, but she called for flexibility "to maximise Europe's capacity to grow".

She said it was justifiable to borrow because Ireland had a low debt rate. She emphasised, however, she only wanted to borrow for road, transport and telecom projects. "We are not going back to the borrowing of the 1980s when we nearly went bust," she said.

Mr Rabbitte said the comments meant Ms Harney had performed a political U-turn.

"Now less than 12 months after an election campaign where these issues took centre stage, the ESRI has effectively endorsed Labour's stance and the Government is engaged in a major U-turn. The PD leader is now advocating exactly the same policy arguments which Labour made at the last election and which she so roundly condemned at the time."

Mr Rabbittee said Fianna Fáil and the PDs regularly lambasted Labour for taking the position that a certain level of borrowing was acceptable.

"The Tánaiste must now explain why she has been cutting back public services at every hand's turn to make savings which she now accepts are unnecessary."