The Minister for Finance, Mr McCreevy, this morning insisted that benchmarking pay rises to public servants were dependent on compliance with the terms of the agreement and warned about the dangers of pricing Ireland out of the employment market with "unrealistic wage increases".
His comments on benchmarking come on the heels of a warning from the Taoiseach, Mr Ahern who said that under the new scheme civil servants who performed poorly would be penalised with cash fines, demotions and pay cuts.
Speaking this morning on Sustaining Competitive Advantage with the European Marketat a seminar at UCD's Smurfit Business School, Mr McCreevy said if the benchmarking payments "are dependent on compliance with the terms of the agreement. If the conditions are not met in any sector, grade or organisation then payments will not be met in that area".
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Mr McCreevy said "moderate and predictable" wage increases "must continue to underpin our economic development" and warned of the dangers of pricing "ourselves out of the market with unrealistic wage increases".
"Unless we can get our price and cost increases down to EU levels with the least possible delay, we will continue to lose competitiveness and ultimately, jobs will be lost," he said.
The Minister also said next week's Budget would be "strategic in its outlook" and would take the "long-term view". He said he was committed to avoiding "short-term, populist decisions".
At meetings in Dublin and Co Louth, over the weekend Mr Ahern said the Government was preparing legislation that would enable it to punish civil servants who "seriously" underperformed in their jobs.
He insisted the benchmarking pay awards would be delivered only in return for verifiable improvement in public sector productivity.
In an implicit reference to unions at Aer Rianta, who have threatened strike action over plans to break up the company, he said: "We have a guarantee of industrial peace right across the public service. Industrial action will lead to non-payment of the increases."
The legislation will allow the Government to extend the scope of the Unfair Dismissals Acts to cover civil servants; reduce pay and rank in serious cases of underperformance; and broaden the range of disciplinary sanctions to include cash fines.
