Documents obtained under the Freedom of Information Act show that the Tánaiste, Ms Harney, was last year ready to accept major cutbacks in the Community Employment Scheme (CES).
The cuts would have left only 15,000 people supported by the scheme at the end of this year, compared to an average of around 28,000 on it last year.
The CES is used to offer work experience and training to the long-term unemployed.
Despite repeated warnings from FÁS that it would cripple the programe, Ms Harney, as Minister for Enterprise, Trade and Employment, had initially agreed to the cuts during budget negotiations last year with the Department of Finance.
Following protests and protracted talks, the Tánaiste's Department eventually managed to find money to keep the numbers employed on the CES to an average of 22,000 throughout this year - a drop of 6,000 on the 2002 average.
Files released under the FOI Act reveal that Finance initially sought to cut €62 million from the scheme, reducing the numbers involved to a 2003 average of 21,600 and a year-end total of just 14,840.
Later, however, it returned and demanded a further €21 million from the programme. "The Tánaiste agreed to this cut," according to an Enterprise, Trade and Employment file.
FÁS strongly opposed the 15,000 ceiling, warning that it would not save Exchequer money since most of those involved would go back on to the live register.
"The reduction of 10,000 in one year would cause a major crisis at individual as well as at community level," FÁS warned.
