Economics:Having carefully constructed an "insurance" coalition - all political risks are covered - that comfortably ensured his re-election, the Taoiseach has returned to his day job of running the country, writes Paul Tansey.

And the first item on the new agenda is the puncturing of public expectations about the economy's future.

The Taoiseach had already set this process in motion following the last meeting of the outgoing Government this month. Once the votes had been safely counted, Mr Ahern expressed the view that "it is clear that we are entering a period of more challenging economic conditions".

The extent to which the Government line on the economy has shifted can be gauged by contrasting the Taoiseach's statement with the Minister for Finance's budget speech a mere six months ago.

Introducing the 2007 budget last December, Minister for Finance Brian Cowen stated: "As I present my third budget to this House, I am delighted to report that Ireland's economy is strong. In 2007 our country will extend its record of outstanding economic progress."

So where did it all go wrong?

The answer is it hasn't. The Minister for Finance was on the right track in his budget speech. The economy will indeed put in a muscular performance this year, with a real economic growth rate in the region of 5 per cent and additions of about 50,000 to the total numbers at work.

Nor is an economic downturn imminent in 2008, although the pace of output growth will decelerate.

The gear change in the Government's view is thus not explained by the economy's headline performance. Instead, it is informed by three separate factors.

First, in the run-up to a general election it is hardly surprising if parties in power accentuate the positive and neglect the negative. Moreover, through the campaign itself the Government parties enjoyed a free ride on the economy as the Opposition parties chose not to contest the ground.

Second, re-election lengthens perspective. The new administration has to govern for tomorrow as well as today. While the real economy is performing strongly at present, worrying trends are emerging that threaten future prosperity. These adverse trends, specific to Ireland, can be reduced to two: costs and prices are rising too rapidly and productivity is growing too slowly. Competitiveness, as the Taoiseach noted, does need to be restored and renewed.

The third, and most important, reason why the Government has started to talk the economy down is to shore up the Programme for Government on which the ink is barely dry. Specifically, the Government is seeking to rein in the rate of public spending growth and to dampen the rate of increase in public service pay.

The core economic content in the Programme for Government was scripted by Fianna Fáil - with environmental mood music added by the Green Party - and traces its lineage back to the Fianna Fáil election manifesto. That manifesto was economically literate, tightly argued and well supported by a full financial framework showing the impact of Fianna Fáil's proposals on the evolution of public spending, taxation and borrowing over the years to 2012.

The economic assumptions underpinning the manifesto - and hence the Programme for Government - were realistic in the main. Its projections were based on an average annual real growth rate of 4.5 per cent over the next five years, with employment forecast to expand by 2.5 per cent a year over the period.

Employee earnings were projected to increase at an annual average rate of 4.5 per cent, with inflation averaging an expected 2.5 per cent a year in the period to 2012.

However, one key assumption lacked plausibility. It held that the growth in base or underlying current public spending could be held to 6 per cent annually in the years to 2012 before the party's election promises were factored into the mix. There was no evidential basis for this assumption, nor were there any clear policy initiatives indicated that might result in its achievement.

In fact, the evidence points in the opposite direction. In the five years from 2002 to 2007 current public spending of Government departments increased by an average of 9.7 per cent a year. On the basis of this year's budget projections, underlying current spending is set to be 12.9 per cent higher than in 2006.

Including the Fianna Fáil spending promises in full would raise the growth in underlying public spending to an average of 7.2 per cent annually in the years to 2012. Given the scale of these expenditure commitments, and in the light of rising inflation and past trends in public spending, this projected rate of increase looks like a serious underestimate.

Current public spending is thus the Achilles' heel of the new Programme for Government for, if underlying current spending cannot be contained to the levels projected, the financial framework underpinning the programme will start to unravel.

Tough choices will then have to be made. Any excessive growth of public spending will have to be curbed either by the deferral of spending commitments made during the election or by the postponement of promised tax cuts. Or both.

By talking the economy down, the Taoiseach is preparing the electorate for just such an eventuality. Not that it's likely of course. It's just insurance.

Just like the formation of the Government.