TAOISEACH Brian Cowen last night lost his second government TD over the medical cards fiasco as the Budget fallout further eroded his Dail majority.

And the departure of Finian McGrath could yet be followed by walkouts from fellow independents Michael Lowry and Jackie Healy-Rae, as the unsinkable coalition put together by Bertie Ahern begins to fall apart.

The exit of the independents would significantly boost the Green party's strength in the coalition, with their support now vital to the very survival of the government.

Mr McGrath's withdrawal of support for the Government came as pressure intensified to reverse the over-70s medical cards decision and the education cuts.

Mr Lowry and Mr Healy-Rae also both appear to be on the brink of pulling the plug.

However, they are waiting until they hold a meeting with government officials tomorrow morning to get an update on the proposals.

"I want people to retain their medical cards and I'm not going to vote for any measure that will see the cards being removed from the elderly," Mr Lowry said. "I have a serious problem with 120,000 elderly people being under the pressure, distress and stress of having to comply with a means test."

Mr Healy-Rae also said he would decide on his future when he sees the Government's proposals today. "There's no hope in the world I could vote for it as things stand. If they change it around with no means test, I'll vote for it, but if they don't, I won't," he said.

In a further sign of the strains between the Healy-Rae supporters and Fianna Fail, the TD's sons voted against the party on Kerry County Council for the first time, on a motion of no confidence in Finance Minister Brian Lenihan and Health Minister Mary Harney.

Councillors Michael and Danny Healy-Rae have never previously voted against the Fianna Fail grouping.

As the medical cards controversy rolls on, education emerged as the next major battleground for the Government.

Angry

Up to 400 secondary schools may not re-open after Christmas because of budget cuts. Angry managers last night warned this would be the only option to protect the health and safety of their pupils in the wake of government cutbacks.

Mr Cowen will today aim to consolidate support within his Government before heading off to China tonight, after postponing his departure for two days.

He has a Cabinet meeting this morning where the medical card controversy and the 1pc income levy will be discussed.

This is followed by a Fianna Fail parliamentary party meeting at 12.30pm on the medical card crisis.

Mr Cowen's promise of an overhaul of the existing proposal is believed to be enough to win over his Fianna Fail backbenchers, ahead of the start of tonight's debate on a motion by Fine Gael seeking a complete reversal of the move.

But Brian Lenihan is not expected to announce changes to the 1pc income levy today, as the issue does not have to be decided until the Finance Bill is put to a vote on on October 20.

In his letter to the Taoiseach, Mr McGrath said his decision followed a patient wait for the Government to reverse its decision and grant universal application of medical cards.

"I have always supported the call for more patriotism. However, my patriotism does not include hammering the elderly, the sick, the disabled and young children in large class sizes," he said.

Mr McGrath's departure also changes the Dail arithmetic, prompting him to propose the re-establishment of the so-called "technical group" in the Dail of independent and minority opposition parties like Sinn Fein.

Independent TD Joe Behan, who last week dramatically split with Fianna Fail, said he would be willing to explore the idea of forming a group, which would grant those TDs extra speaking rights.

Sinn Fein Dail leader Caoimhghin O Caolain also indicated that he would be making contact with the non-government aligned independent TDs over the next 24 hours.

- Fionnan Sheahan, Aine Kerr and Michael Brennan