Prof Brendan Walsh's view that tax cuts promised under Partnership 2000 should be forgone prompted angry reaction from trade unionists this week. Peter Cassells, the general secretary of the ICTU, said the Government should ignore him.

Prof Walsh is a long-standing contributor to national economic debate and has often been critical of the various national wage agreements. He sees signs of galloping inflation on all fronts - and Thursday's figures will serve only to underline the fear, in his view.

"The consumer price index has been rising since the last quarter of 1997 and the monthly inflation rate has been running at 0.5 per cent for three months now," he says.

He believes the economy is in danger of being given too much stimulus - lending is increasing by 25 per cent, interest rates are about to fall by at least 2 per cent and another fall in exchange rates is likely.

He says this all means the bubble may burst. "Although there are many differences, there are also some parallels between our present situation and the run-up to the crisis in East Asia late last year. Only by applying the brake now can we ensure a smooth return to a sustainable growth path."

He does not see many ways to stop inflation building up a head of steam. For example, "exchange rate and monetary policy changes are ruled out by EMU commitments". However, the Government still has control over taxation and this is crucial.

"Tax cuts in the context of the rising level of spending would be clearly inappropriate from a macroeconomic perspective, however desirable on other grounds," he says.

This is the view which drew the sharp response from trade unionists this week. They point out that the tax cuts they are seeking for their members are written into Partnership 2000.

He says if the trade unions see his proposal to cancel the tax cuts as "reneging" on the Partnership 2000 deal, "then so be it".

Prof Walsh says the "most that should be contemplated" by the Minister for Finance, Mr McCreevy, in his Budget for next year "is a revenue-neutral package, involving cuts for those on lower incomes financed by higher taxation of the well-off".

He says the "best strategy" would be to introduce a deflationary Budget in which substantial cuts are made in current spending, particularly in the public sector pay bill.