The general secretary of the Irish Congress of Trade Unions (Ictu) has written to the Taoiseach seeking significant increases in mortgage interest relief to offset the recent rise in inflation.
In the letter, David Begg told Taoiseach Bertie Ahern that extensive mortgage relief to ease the burden on homeowners was needed "sooner rather than later". About one-quarter of mortgage-holders are "in very serious difficulty" in relation to affordability, he estimated.
He also said higher-than-expected inflation meant the trade unions would "probably" fall short of insulating their members against increases in the cost of living.
"Delaying further action until budget 2008 could see a build-up of financial pressure on individuals and create an inexorable demand in affiliated unions for a renegotiation of the pay terms of the agreement," Mr Begg warned.
Inflation stands at almost 5 per cent, above the 4.6 per cent annual pay increase negotiated by the trade unions in the Towards 2016 pay deal.
As a result, Ictu is coming under growing pressure from its members to renegotiate the deal, something the Government has vowed to block.
Trade unions raised their concerns about inflation at a meeting with Mr Ahern last month, at which a number of budget measures to improve the financial situation of homeowners was discussed.
Since then, concern has grown following another interest rate hike. Mr Begg said matters were not helped by price increases such as the 8.5 per cent rise recently announced by the VHI.
In the letter, Mr Begg rejected the contention of employers that the current increase in inflation was a "spike".
The European Central Bank (ECB) has increased its interest rates eight times since the beginning of last year and a further two increases are expected over the next six months, he said.
"Indeed, there is no clear indication that this will be the end of the tightening cycle." He suggested that the ECB rate, currently at 4 per cent, could reach 4.75 per cent or higher.
Referring to "considerable tension" within the trade unions over the issue, Mr Begg pointed out that, when the national pay deal was struck, the official forecast for inflation was just 2.7 per cent. "The intention, from our perspective, was to ensure that some share of the growth in the economy also accrued to workers."
Mr Begg urged Mr Ahern to target relief on those most adversely affected by the interest rate rises. He estimated that about 50 per cent of people had paid off their mortgages, while another 25 per cent could manage their debt.
This left 25 per cent who were in serious difficulty, and the situation was worsened by the fact that only a small proportion of Irish mortgages were fixed. "It is important to bear in mind, Taoiseach, that it is this category of person who is likely to be bearing the cost of childcare and, in many cases, the cost of a long commute to work," Mr Begg wrote.
As a result, this section of the population had a higher personal inflation rate than anyone else. "From the perspective of social justice, we should try to protect them, as far as possible, from these increasing cost pressures."