The Taoiseach has signalled that tax cuts for higher earners in December's Budget may be limited in order to curb inflation and to ensure that the less-well-off receive the benefits of economic growth.
Reacting to the warning against generous tax cuts from the president of the European Central Bank, Mr Wim Duisenberg, Mr Ahern said that continued economic success was the first priority of the Budget. He gave a strong indication that this could have implications for the Coalition's tax-cutting strategy.
Amid growing pressure from trade unions, whose memberships have seen their agreed wage rises eroded by inflation, Mr Ahern stressed that the Government shared the concern over rising prices.
However, Government fiscal policy would have to "keep helping people in need", with tax cuts therefore possibly being limited for some, but not all.
Asked specifically if proposals to limit tax-cutting were now on the table, Mr Ahern said that the newspapers were carrying stories every day to the effect that not everyone had seen the benefits of economic success. "You have to keep on looking at how you can help people in need, so limiting them [tax cuts] for some people might be possible, but limiting them for everyone might not be the best policy."
This indication that lower-paid workers may benefit disproportionately from the Government's tax-cutting strategy will be welcomed by the unions. However, the Taoiseach and his Ministers are now faced with the delicate task of trying to balance the commitment to tax cuts, the desire to curb inflation and the attempt to keep the creaking social partnership deal intact.
Mr Ahern's comments came after Mr Duisenberg said in Dublin on Wednesday that Irish inflation could threaten continued economic success. His speech was seen as a clear suggestion that tax cuts - particularly those aimed at higher earners, which are seen as inflationary - should be curbed.
Last night, in a statement in response to Mr Duisenberg's comments, the Department of Finance said that it was already taking action to curb inflation and pointed to the economic and social achievements of the past decade as well as to Ireland's high growth levels and low unemployment.
"The president of the ECB has suggested that action must be taken. The Government agrees with that and has already implemented a range of measures", the statement said.
It pointed out that the inflation problem had to be seen "in the context of extremely rapid growth and low unemployment compared to most of Europe."
The statement added: "In commenting on our current circumstances, commentators should bear in mind the economic and social achievements of the last decade."
Mr Ahern emphasised earlier that Ireland was not unique in experiencing inflationary pressures. The strength of the dollar, the currency in which oil was purchased, was causing problems for many countries, he said.
The outlook for inflation remained poor last night as a marginal rise in the value of the euro against the dollar was offset by continuing record oil prices in advance of a key meeting of OPEC this weekend.
Mr McCreevy and the other euro zone finance ministers, who meet in France today, may issue a statement reinforcing their view that the value of the euro is out of line with economic fundamentals.