PARTNERSHIP: A national partnership deal could still be on the cards despite strongly negative trade union reaction to the Budget, writes Chris Dooley, Industry and Employment Correspondent

In the view of union leaders, Mr McCreevy has not helped the prospects of an agreement with a Budget that, when indirect tax increases and other measures are taken into account, has left workers worse off.

However, as one union negotiator put it last night, he showed sufficient restraint "not to frighten the chickens".

IBEC, the business and employers' body, took a far more positive view and was encouraged by what it saw as a serious attempt by Mr McCreevy to get the public finances under control.

Its industrial relations director, Mr Brendan McGinty, said the partnership talks were "a difficult process" to begin with. "But it's probably fair to say the Budget doesn't make it any more difficult, because the pain is shared by everybody."

Mr David Begg, the general secretary of the Irish Congress of Trade Unions, also acknowledged that Mr McCreevy had made "some effort to share the burden of this adjustment".

He added there were positive things in the Budget. Mr McCreevy had abolished some of the tax shelters availed of by the rich and attempted to recoup some of the "huge windfall gains" made by hotels and banks from the corporation tax regime.

Overall, however, the Budget had done "nothing to create a fairer society", he said.

"The income tax changes are minimal and, when associated with changes in indirect taxes, will result in a net loss.

"Also, the social welfare increases will not result in any reduction in relative poverty in Ireland.

"They should have been linked to average earnings as recommended in the National Anti Poverty Strategy."

While the Budget contained no "structural impediment" to a new agreement, it had not, he insisted, made the talks environment any easier.

Mr Brendan Archbold of Mandate, which represents low-paid workers in the private sector, said the Budget should give unions "food for thought" in advance of further partnership negotiations.

He said the call by employers for a pay pause as part of a new deal would be fought "even more vociferously" by unions, given the increases in VAT and other measures in the Budget.

Mr Des Geraghty of SIPTU was equally adamant that it would now be "more difficult" for unions to reach agreement on a possible successor to the Programme for Prosperity and Fairness.

The key point for Mr McCreevy, however, was that no one on the employer or union side was saying a deal could not be done.

Providing a framework for the partnership talks was, he made clear in his speech yesterday, a primary objective.

"Social partnership has played a key role in the story of our success so far. The Government is keen that it should continue to play the same role in this more difficult environment," he said.

Everyone had already known, however, that yesterday's Budget could not deliver the income tax cuts that have been crucial to previous partnership deals.

"Our main concern was that it would not do too much damage. As it turned out, it could have been a lot worse," said one union leader.

With the pre-Budget uncertainty now out of the way, negotiations are expected to intensify in the coming days.