Celtic Tiger is DEAD; AHERN TO TIGHTEN SPENDING.

Byline: PAUL CLARKSON

TAOISEACH Bertie Ahern yesterday warned the Social Partners: The Celtic Tiger is dead.

Mr Ahern's stark warning that the economic boom is over came on the morning the government launched talks with union leaders and employers to find a successor for the Programme for Prosperity and Fairness.

Over the next few months they will hammer out a deal on how best to spend Ireland's public money for the next five years.

But with the economy facing freefall, the message was blunt - it's time to tighten our belts.

The Taoiseach said: "The reality is that general economic conditions are tighter now than they have been at any point in the last five years.

"The international environment has become dramatically more challenging over recent months and the outlook is, to say the least, uncertain.

"The inevitable impact on the public finances has become sharply evident over the recent weeks and months.

"Therefore it is vitally important that realism guides us all."

Mr Ahern, Tanaiste Mary Harney and Finance Minister Charlie McCreevy met for the talks at Dublin Castle yesterday morning.

Speaking outside, Minister McCreevy said wage hikes for public workers had to be balanced against provision of services.

He added: "The boom is over. Economic growth this year has slowed markedly. As I have said on more than one occasion, we can only spend what we have, when we have it.

"We cannot spend what's not there, no matter how desirable the objective."

And he warned that current public sector pay deal plans would cost the state EUR12million. But he said Ireland's economy would still grow, though slowly at around three per cent a year over the next three years.

Ms Harney is thought to be planning to raise revenue through indirect taxation such as VAT instead of raising income tax.

The Conference of Religious of Ireland (CORI) pressure group said the new social deal should strive to bring Irish public spending up to EU levels.

The CORI Justice Commission's Fr Sean Healy said: "Ireland's per capita income is well above the EU average, but our infrastructure and social provision are well below the EU average.

"The situation is not acceptable in Ireland in the 21st century. We propose the core objective of policy in taxation should be that those who have more pay more while those who have less pay less."

Negotiations begin in earnest next week and the government will have to persuade hundreds of thousands of workers to accept a pay freeze to balance the books.

The PPF deal began in 1997, shortly after Mr Ahern took power. The last deal gave workers rises of around 20 per cent over three years.

CAPTION(S):

WARNING: Bertie Ahern