TAOISEACH Enda Kenny confirmed last night there would be some easing of the cuts in education in next month's Budget.
Education Minister Ruairi Quinn has to identify savage cuts of over €100m in his department's budget.
But Mr Kenny said any budgetary flexibility would be used to fund job creation and education.
Earlier this week, the Irish Independent reported the Government would ease the pressure on Mr Quinn to increase the pupil-teacher-ratio in schools.
The Taoiseach also said "a shocking 22pc of households were classified as jobless" and this "cannot be allowed to fester".
Speaking at the annual dinner of the Irish Business and Employers Confederation, Mr Kenny also warned workers could face periods of prolonged unemployment unless the system was reformed.
Also yesterday, Finance Minister Michael Noonan indicated the reduced VAT for the hospitality sector would be increased unless an alternative source for the tax revenue could be found.
Mr Noonan also took a swipe at unrealistic demands being made for the Budget.
He said when local government and lobbyists were sending in their pre-Budget submissions "they might suggest who I tax instead to get €360m".
The lower rate of 9pc VAT was one of the first policies implemented by Mr Noonan when he took up office.
But the minister said when the special rate was introduced it was only as a temporary measure.
"The difficulty I have is when we removed it, it was a pump priming exercise intended to be temporary and the people in the Department of Finance and in Revenue built in its restoration to the Budget figures," he said.
"So in very simple language, if I don't bring it back I have to find something like €360m elsewhere."
Speaking at the University of Limerick, the minister said he has been heavily lobbied on the issue.
"There is a big lobby on but when I reduced the VAT on the whole hospitality industry from 13.5 to 9pc, there wasn't a single representation on my desk to do so, but people were very surprised and it worked and it created a lot of jobs.
"It has reinforced and got a lot of the tourist industry back again and the tourist industry is now growing," he said.
Tourism Minister Leo Varadkar is also understood to be supportive of the sector retaining the lower VAT rate.
But Mr Noonan doesn't want temporary measures to become permanent fixtures.
Since its introduction in 2011, the Restaurant Association of Ireland (RAI) told a meeting for the Oireachtas Committee on Jobs, that some 9,000 jobs had been created in the sector
RAI chief executive Adrian Cummins says the 9pc rate is crucial to the survival of restaurants.
"We are one of the only industries creating employment in every corner of the country, and if the 9pc VAT rate is increased, unfortunately jobs will be lost everywhere as well," he said.