Union leaders yesterday told the Government they needed a "straight and early answer" as to how workers are to be compensated for inflation.

IMPACT general secretary Mr Peter McLoone said: "In very simple terms, we are trying to protect the value of what was negotiated and our members accepted in the national agreement.

"We need to know if the employers are prepared to do business on pay or not," Mr McLoone said. SIPTU general secretary Mr John McDonnell said the problem could be resolved in a non-inflationary way if employers were willing to sit down across the table. "The alternative is workers seeking increases across the economy. It will be inflationary but they will have little choice," he said.

MSF national officer Mr Gerry Shanahan described the crisis as a "defining moment" in the development of social partnership in Ireland. ATGWU leader Mr Mick O'Reilly said: "Employers cannot expect to have it both ways." While inflation eroded workers' living standards, employers were engaging in "naked corporate greed".

He said a minimum 5 per cent increase was needed to offset inflation.

Next week, the Government team will meet employer bodies to discuss the situation. Direct talks between unions and employers should follow. This will be the real test for the current national agreement.