Cowen: We will have to proceed with cuts

Talks between the Government and trade unions on cutting public sector spending by €1.3bn have collapsed and the Taoiseach Brian Cowen has said that they will have to plough on with cuts in next week's Budget.

The Government has rejected a union proposal to allow public servants take time off instead of a pay cut in the Budget.

Crippling public sector strikes now look inevitable.

The Taoiseach Brian Cowen and Finance Minister Brian Lenihan have addressed a press conference at Government buildings this evening.

Mr Cowen said he is genuinely disappointed that an agreement couldn't be reached, but he will plough ahead with the cuts in next week's Budget.

"This is a very challenging situation for everybody concerned," he said.

"From our point of view, unfortunately not having being able to find a basis for agreement...the Minister for Finance will have to proceed on Wednesday next with a budget that will have that adjustment of €4bn - including a contribution from the public sector pay and pensions side of the exchequer account which will see a reduction of €1.3bn."

The Irish Congress of Trade Unions said it is astonished at the Government's decision to terminate the talks.

IMPACT's Peter McLoone said the Government has lost a "glorious opportunity".

"It's a matter of...huge disappointment - I think astonishment that an opportunity like this has been lost," he said.

"All of the things that the government has been seeking were on the table to be delivered; and by taking the approach that it has, it seems to me the the government has lost a glorious opportunity" he added.

Dr Kieran Allen, from the Department of Sociology, UCD said today's developments could have far-reaching consequences.

"This is not just about public sector workers - it's about public and private sector workers," he said.

"And it's about the fact that this government's only solution to the economic mess is pay cuts and slimming down jobs rather than actually creating jobs".

"If they had gotten away with a tax on the public sector, there would have been another round of attacks on private sector workers," he added.