Public-sector workers tonight threatened crippling strike action after bearing the brunt of the toughest Budget in the country’s history.
In a much-feared €4bn cost-cutting package, severe pay cuts were imposed which angry union leaders said targeted middle earners.
The lowest paid were hit with 5% cuts while top civil service bosses, some on more than €150,000, had salaries slashed by up to 15 per cent.
Impact trade union leader Peter McLoone, who led failed pay negotiations, warned 350,000 workers would now prepare for threatened industrial action.
“All existing and former public servants must now mobilise to protect their incomes,” he said.
But Finance Minister Brian Lenihan signalled he was prepared to face down unions and even raised the spectre of further cuts if reforms proposed in last week’s talks are not agreed.
“If everyone agrees they were worthwhile reforms then they were worthwhile reforms and if everyone agrees that they will save money then they may have singular merit of avoiding further reductions in public sector pay,” the minister said.
Mr Lenihan halved unemployment benefits for young claimants, cut dole payments by €8 a week, reduced child benefits by €16 a month and introduced a 50c charge on medical prescriptions.
He tried to comfort the nation with a promise the worst was over.
“The effort demanded of every citizen in this Budget is substantial, but it is the last big push of this crisis,” he said.
“Further corrections will be needed in the coming years, but none as big as today’s.”
Petrol and diesel go up from midnight by 4c and 5c respectively as part of the much-touted carbon tax, which will also be applied to home heating oil, coal and peat briquettes from next May.
In a move to stem the flow of shoppers from the Republic into the North, excise duty on a pint of beer and cider will come down 12c, with 14c shaved off the price of spirits and 60c off a bottle of wine.
A reduction in VAT from 21.5% to 21% is also expected to hit cross-border trade, on the day the British government raised its VAT rate.
Mr Lenihan also claimed to have finally put to bed the concerns about the global reputation of Ireland Inc.
“I don’t think there should be any international question marks after this,” the minister said.
However, critics say the petrol and diesel price hikes will now give shoppers another reason to buy in the North.
Among the most contentious of the hard-hitting measures are the public-sector pay cuts, which unions have already threatened could spark mass strike action.
Salaries up to €30,000 will suffer a 5% drop, with an additional 7.5% cut on the next €40,000 over and above that, and another 10% on the next €55,000 for earners making between €70,000 and €125,000.
Top-earning civil servants on more than €125,000 will be forced into a pay-cut of between 8% and 15%.
While Taoiseach Brian Cowen takes a 20% cut, he remains one of the best-paid leaders in the world and better paid than British Prime Minister Gordon Brown or German Chancellor Angela Merkel.
Government ministers take a 15% cut and President Mary McAleese will also take a 20% drop in her salary.
Congress, teaching unions Asti and INTO, the Irish Nurses’ Organisation, Siptu, Unite and gardaí joined forces to attack the Government.
In a sop to the car industry, which collapsed along with the economy, a one-year car scrappage scheme allows for a €1,500 tax break for buyers swapping an old car for a new, lower emissions motor.
One of the few surprises was a new €200,000 levy on Ireland’s super-rich, who are tax-resident offshore, and despite vast financial interests in the country pay little or nothing to the State coffers.
In a move that outraged anti-smoking campaigners, the price of cigarettes remains untouched.
Mortgage interest relief was also extended until 2017, when it will be abolished completely.
Mr Lenihan admitted the country had been shaken but vowed it was now on the road to recovery.
“By taking the difficult but necessary measures now, we will rebuild our nation’s self confidence here at home and our reputation abroad,” he said.
Labour leader Eamon Gilmore denounced the Budget as viciously anti-family, fundamentally unfair and socially divisive.
“Everyone knew that a tough budget would be required because of the unprecedented economic shambles created by Fianna Fáil over the past 12 years, but few people could have anticipated a budget that would be so lacking in fairness,” he said.
Fine Gael deputy leader Richard Bruton said: “You have hit people who are down. The hitting of child payments is very short-sighted.”