Nothing is more likely to galvanise voters to rebel against the status quo than a fall in their living standards. If the present rates of inflation persist, pensioners and social welfare recipients are likely to be worse off at the end of this year than they were in 1999, in spite of roars from the Celtic Tiger.

The opposition parties are already sniffing the air, scenting future political opportunities. Michael Noonan of Fine Gael has condemned the Government's tardy response to the surge in inflation and has demanded a raft of future concessions for workers, pensioners and those on social welfare.

Eamon Gilmore of the Labour Party wants the Dail to be recalled to increase welfare benefits and to take action on the housing crisis.

With the Government on holidays, Seamus Brennan has been making reassuring noises. Last week's inflation rate of 6.2 per cent caused the Government Chief Whip to appeal for social solidarity. The best way to counter inflation, he insisted, was by adhering to the terms of the Programme for Prosperity and Fairness. In that regard, the Government was taking careful note of the views of the social partners, he said, and would be taking action when it framed the Budget.

Last time out, Charlie McCreevy got it seriously wrong. He predicted a 3.5 per cent inflation rate for the year, but he also underestimated economic growth, talking of a GNP rise of 5.75 per cent, when it may exceed 8 per cent. As long as productivity exceeded wage increases, the economic party could continue, but the spectre of rising inflation put it all at risk. If wages began to chase or exceed inflation rates, the bottom would fall out of the economy.

The dangers are very real, but they are recognised by the social partners. The Irish Congress of Trade Unions is as determined as the Government and IBEC to keep the PPF on the road, if that is at all possible. The size of the challenge ahead will be quantified next week when the Department of Finance publishes its Economic Review and Outlook. That document is expected to recast the expected inflation rate for the year while looking at a likely increase in European interest rates and its implications for the economy.

A fine head of steam is building up and the pressure will be felt in the political arena when the Dail returns in October. By that time, negotiations will have opened between the Government and ICTU on measures designed to offset the impact of inflation on the three-year pay agreement contained in the PPF and on living standards in general.

The Government will be under siege from a number of fronts as the various tribunals continue to wash dirty political linen in public. Rises in interest rates will make life even more difficult for would-be homeowners. The greatest threat though may lie in surging inflation. It came like a thief in the night, piggybacking on the coat-tails of the biggest "giveaway" Budget of all time; but, because the Celtic Tiger was not supposed to operate according to the rule book, the signs were disregarded. For months, McCreevy dismissed public warnings and criticisms as the ramblings of left-wing pin kos. Forget the Jeremiahs, he urged, and give consumption a lash. By last June, though, when inflation hit 5.2 per cent, even he could not ignore what was happening.

ICTU demanded a special meeting of the social partners and spoke of renegotiating the pay terms of the PPF. The opposition parties kicked up merry hell in the Dail. Bertie Ahern conceded that inflation could conceivably rise to 6.2 per cent, before falling back. Last week, that figure was reached, and it may be surpassed when European interest rates rise. However, officials still expect inflation rates to fall back towards the end of the year.

Fianna Fail and the Progressive Democrats had looked to a giveaway December Budget as the way to restore their political fortunes with the electorate, but it now seems as if a sizeable portion of the surplus Government cash may be swallowed up in compensating people for falling living standards.

It wasn't supposed to be like this. When the social partners sat down to negotiate the terms of the Programme for Prosperity and Fairness last year, the rising economic tide was predicted to lift all boats. That was before Charlie McCreevy did a solo run in his December Budget and gave the most expensive breaks to the well-heeled in society.

There was a 2 per cent cut in the top and standard rates of income tax, along with reductions in corporation, capital gains and capital acquisition taxes. Down the list came the little people. Old-age pensioners got £7 a week and those on the dole received an extra £4.

Since then, inflation has surged to 6.2 per cent and welfare recipients and the unemployed became poorer as their 5 per cent budgetary rise was wiped out. The 5.5 per cent wage increase negotiated under the PPF for workers was also gobbled up, but the accompanying tax breaks left them marginally better off.

ICTU is talking about a package of measures which would reduce fuel and travel costs; temporarily reduce selected VAT rates; encourage competition and monitoring of prices in the services sector; review aspects of the retail trade and impose higher employers' PRSI charges to pay for childcare facilities. In addition, Congress wants bigger tax cuts for workers and higher social welfare payments in return for supporting the PPF.

It looks like becoming a long and difficult autumn for the Government.