Taoiseach Brian Cowen said today a reduction of €1.3 billion in the public service pay bill is "unavoidable" because pay makes up such a large proportion of State expenditure.
He also said there is “no room for manoeuvre in raising income tax” instead of pay cuts because the top 4 per cent of earners already pay 48 per cent in income tax.
"This adjustment is unavoidable since pay forms such a large part of public expenditure".
The public sector unions and the Government resumed talks on possible reductions in the public sector pay bill this afternoon. Unions are seeking an alternative to cuts in pay for the 300,000 staff on the State payroll.
Entering the talks, Impact general secretary Peter McLoone, rejected criticism from Mr Cowen of industrial action, planned for tomorrow and November 24th.
The Irish Congress of Trade Unions has organised a national day of protest with marches planned for eight cities and towns tomorrow. They will take place in Dublin, Cork, Galway, Limerick, Waterford, Sligo, Tullamore, and Dundalk.
Mr McLoone said unions had been involved in negotiations for the past seven months without success and members successful “want to vent their anger” at the Government.
Congress general secretary David Begg said he hoped the protests would prevent potential cuts of €4 billion in the budget.
“The situation is very bad but our feeling is that if the Government goes with this crash programme it could do a lot of damage. It will have a huge deflationary shock effect on the economy, making unemployment much worse and the lives of people much worse.
“We’re recommending that the adjustment is made over a longer period of time and in the course of doing that we preserve the fabric of society.”
The Frontline Alliance has called on all members to support the marches and said it “fully supports the Ictu demand that job protection and job creation are absolute priorities”.
Alliance secretary Liam Doran said the focus of the Government has been on bailing out the banks and using PAYE workers in the public or private sector required to pay for this.
Ictu also said it was not engaged in formal talks with the Government on a new National Agreement.
Employer’s group Ibec has criticised the protest saying a plan to protect jobs, “not a protest to disrupt jobs” was required. Old solutions and old style protests will not make one Irish person better off or their job more secure, Ibec director of industrial relations Brendan McGinty said.
Addressing the European Foundation Forum in Dublin Castle, Mr Cowen appeared to rule out acceding to union requests that the reductions in public spending be staggered over a longer period.
“We simply cannot afford to long-finger debt reduction,” he said, adding that such an approach would lead to the creation of a huge burden of debt.
“Postponing action now would result in additional cuts of this nature in the years ahead,” Mr Cowen said, adding that reducing the deficit by achieving a budget adjustment of €4 billion in 2010 was “critical” as the country was borrowing €400 million a week and "this cannot continue".
Separately, the Minister for Finance Brian Lenihan said he wanted to stabilise the budget deficit at 12.5 per cent of gross domestic product, in what appeared to be a slight upward adjustment of previous forecasts.
"With further weakening on the tax side ... it's now at 12.5 per cent," Mr Lenihan told a conference in Dublin this morning. "We have to stabilise and lock in at that figure.
"We won't have credibility on world markets and won't ... demonstrate the capacity to run our own affairs if we don't lock in at that 12.5 per cent now," said Mr Lenihan, who had earlier forecast a 12 per cent budget gap for 2009 and 2010.
"Great credit is due to the public servants who have taken a great deal of public abuse ... and have accepted this particular adjustment," Mr Lenihan said. "This shows there is a tremendous resilience in the Irish workforce."