The Minister for Finance, Mr McCreevy, and the Minister for Defence, Mr Smith, appear to be at odds over the extent of cuts in the Defence Forces outlined in the recently leaked draft of the Government White Paper on Defence.
They also disagree on what proportion of savings from restructuring and asset sales should be reinvested in the Defence Forces.
Mr McCreevy's Department has objected to the draft proposals in Mr Smith's White Paper to reduce by 1,000 the number in the Defence Forces, to a total complement of 10,500.
Mr McCreevy's Department is continuing to seek a greater cut. It wants the forces to be cut to 8,300, a reduction of 3,200 in the current establishment figure of 11,500.
Mr McCreevy's senior civil servants, in their reply to the circulated draft White Paper, have also said the Army should have a one-brigade structure of 8,300 personnel, and not the three-brigade structure of 10,500 envisaged in the draft document.
Another difference of opinion between the two Ministers is over the distribution of savings made by the cuts in the Defence Forces.
Mr Smith has promised that savings made as a result of redundancies will be ploughed back into the purchase of new equipment for the forces. It is acknowledged that much present equipment is out of date and that there are major shortages.
However, Mr McCreevy's proposals are for only 50 per cent of savings to be returned to the Defence Forces for the purchase of equipment. The remainder would be used to help meet the bill for compensation claims for hearing damage by serving and retired personnel.
Mr McCreevy's Department is also understood to be seeking the disposal of extensive lands and barracks owned by the military, with most of the income returning to the Exchequer.
The Department of Finance, in its reply to the White Paper draft, says the Minister believes that "the benign security outlook and positive on-island security environment" support the argument for a one-brigade structure with an approximate strength of 8,300, and that this should be the target strength of the Defence Forces.
It adds: "The Minister recognises that it may not be possible to achieve the 8,300 target in the short term and he would be willing to agree, therefore, to an intermediate target of 9,500 to be achieved by the end-2004 . . .
"This approach should provide savings of approximately £25 million per year once the 9,500 target had been achieved, and these savings would be in addition to the £25 million savings per annum indicated in the draft memorandum and White Paper."
The Department of Finance "observation", as the document is known, on the draft White Paper points out that Mr Smith's proposals were that all pay savings arising from the reduction, and all revenue arising from the sale of property, would be reinvested in equipment and military infrastructure.
It says: "Given the preceding extracts from the White Paper outlining the `benign' security outlook] and the considerable potential additional savings if the 9,500 target is accepted, the Minister cannot agree to these proposals.
"He proposes instead that the savings from reduced numbers should be allocated fifty-fifty between equipment for the Defence Forces and compensation for Army deafness claims."
Meanwhile the Minister for Defence is continuing to come under pressure from senior military staff over the White Paper proposals to cut the Defence Forces strength by 1,000.
They have said it will be impossible to maintain the current Irish commitment to international peacekeeping missions if the cuts go ahead.
It is understood the military is seeking to split the proposed 1,000 cut to 500, but only on the condition that the Government fulfil a previous promise to maintain continuous recruitment.
The military would like to see 500 recruits continuously in training. This, they point out, would also help lower the average age of Defence Forces members, which is one of the stated objectives of the White Paper.