Harney: IMF will run country unless cuts are made

The International Monetary Fund will take over the running of Ireland if the Government does not inflict painful slashes to public spending, Health Minister Mary Harney claimed today.

As the Cabinet went on an all-out offensive to sell the need for massive cutbacks, Ms Harney threatened the UN agency could step in and seize control of the State's purse strings.

The stark scenario would lead to overnight cuts of as much as 40% in in health, education and social welfare, according to the ex-Progressive Democrats leader.

"If the Government hasn't the capacity to do what's needed, then others will come in, like the IMF, and overnight they will make decisions," she said.

"If others come in, like the IMF, to take over this country because we haven't the capacity to make the tough decisions, then they will immediately start cutting expenditure by maybe 30 or 40%, and that is a fact."

Ms Harney made the remarkable claims on a day when Taoiseach Brian Cowen also suggested more pay cuts for Cabinet ministers, who put on a united front to prepare the country for a much feared belt-tightening Budget.

But the Department of Finance played down the threat, saying the IMF can only come in if invited and only after every possible avenue of borrowing was exhausted.

"In order for us to avail of the IMF, we would have to invite them in and that would mean we are unable to access any alternative funding," said a Finance spokesman.

"Because we are a member of the Eurozone, we are currently in receipt of funding from the European Central Bank and we don't envisage any assistance from the IMF."

Mr Cowen stressed though there was a shortfall of €23bn.

"That's not a sustainable position. We have to address that," he said.

Finance Minister Brian Lenihan insisted borrowing could not continue at unsustainable levels and, in another ominous nod to huge cost-cutting, said ever-increasing taxes would not solve the country's problems.

"If we make the right decision now we can create a better economy for the future and that's vital for this country," he said.

Environment Minister John Gormley said cutbacks would hit every single Government department, but suggested those with bigger budgets - health, education and social welfare - would feel the most pain.

"It is going to be a difficult budget - there is no reason why we should mislead people on that, we have to tell people the truth," he added.

Responding to Mr Cowen's claims that senior Government figures would have to set an example by taking significant pay cuts, Education Minister Batt O'Keeffe said the entire Cabinet would agree to such a move.

Cutbacks of up to €4bn could be expected next year, with the already struggling health service - which accounts for 27% of all public spending - set to take a major hammering, according to Ms Harney.

But she claimed if tough decisions are taken in the imminent Budget and throughout next year, the country would start seeing light at the end of the tunnel.

"This is not going to go on forever, the country will begin to grow again," she said.

"We will begin to grow employment and prosperity, we will see a rise in our living standards, but that will not happen without the Government taking the corrective action that's necessary.

"It's going to be incredibly difficult but we have to do it."