The Cabinet held a marathon six-hour meeting today to plan what is expected to be the toughest Budgets for decades.
With a likely €7bn hole in the public finances for 2008, Government ministers held a robust discussion on options such as increasing borrowing, raising taxes or further public spending cuts.
Up to 1,000 jobs in the health service will be shed over the next year and another redundancy package across the wider public service is also being considered.
Defence Minister Willie O’Dea said after the Cabinet meeting that the Government will have to break EU borrowing rules to balance its books in 2009.
Speaking about the state of the public finances, he predicted: “It could be €6.5 or €7bn below target this year but we won’t know until the final figures come in.
“It will be something in that region which creates a very considerable job for the Government.”
“We’re certainly going to have to borrow to square the circle but you must be careful about how much you borrow.”
“There is no doubt that on this occasion we will certainly have to exceed the 3% Maastricht Treaty guidelines.”
Mr O’Dea also said that the Cabinet would be convening again on the issue later this week – as well as holding its usual meeting on Tuesday.
Exploring options open to the Government, the TD told TV3’s 'The Political Party': “Raising taxes too much tends to depress economic activity which is the last thing you need at the moment.”
Finance Minister Brian Lenihan said in the Dáil on Thursday that he would like a HSE staff cull extended across the wider public service.
But Mr O’Dea said today: “The government has to consider that. But it may very well be that it is applied across the wider public sector.”
A clearer picture of the public finances will emerge on Thursday when Exchequer figures for the first nine months of the year are published.
Live Register data for September is due on Friday.