AS the days are ticked off from now until the Budget on December 9, the warnings of impending doom grow more shrill and the language more apocalyptic. It is tempting to dismiss it as hyperbole, to close the ears and hope against hope that this is the normal war of attrition that takes place before a difficult budget, but these really are defining moments.

Brian Lenihan, the Minister for Finance, knows it and there are signs that the rest of the Cabinet, including Brian Cowen, the Taoiseach, is finally prepared to accept that Ireland is on the edge of a financial abyss.

The self-delusion that has characterised so much of the past 12 years of Fianna Fail rule has been slowly, painfully stripped away by the devastating consequences of the recession and by the dawning realisation that Europe will only continue to indulge Ireland if the Government delivers on its promises to cut its spending.

Cowen's conversion to economic reality has come late in the day, and there is no way of gauging its durability. It will have to hold in the face of trade union belligerence and public sector strikes in the run-up to the Budget, and then it will have to withstand the outpouring of anger that a tough Budget must provoke.

The stark facts of Ireland's predicament are well-known. Recession has wrought havoc with the public finances, wiping away billions in tax revenue as businesses collapsed, hundreds of thousands joined the dole queues and the housing market imploded. That has created a massive gap between what the Government collects (less than €32bn this year) and what it spends (€58bn this year) -- and that's before the full cost of saving the banking system has been factored in.

To cover that gap we have to borrow, and that borrowing costs us more than any other country in Europe. Unless we close the gap, the interest payments on those borrowings will soon consume all our tax revenues, driving us over the edge and into the abyss.

Part of our economy -- the construction-fuelled boom that inflated the bubble economy from 2002 -- has disappeared and will never return. The tax revenues generated by the construction bubble have also disappeared, never to return, and in their place we have the black hole of a structural deficit. That's the bit that recovery, no matter how powerful, will not repair and it accounts for between €10bn and €16bn of the annual deficit -- a wide range, but even at the lowest estimates it represents an immense challenge.

This December's Budget has to be the start, not the finish, of a multi-year programme of pain. Its severity will have to be matched, or exceeded, every year until 2013 if Ireland is to stay afloat. Failure cannot be contemplated, because failure brings catastrophe on a scale that would match Iceland's, or exceed it.

Failure would mean that Ireland's slow-motion collapse would turn into a devastatingly swift descent, because despite the severity of our recession we have been shielded from even greater collapse by the protective cloak of the euro and the indulgence of the European Central Bank. Ireland surrendered monetary policy to Europe when we signed up for the euro, and we lost effective control of everything else when our banking system collapsed.

Every plan of substance must now be approved by the European Commission or the European Central Bank, or both. Our bank rescue plan is orchestrated from Europe and our next four budgets will also need Europe's approval. Sovereignty is a quaint historical concept, which is probably just as well given the depths of our problems and the genetic absence of backbone in Irish politics. Brian Lenihan knows that he has no choice and no freedom, and it seems that Cowen, belatedly, has joined him in the real world.

On Thursday, appropriately at the European Foundation Forum, the new Cowen made it crystal-clear that he would not bow to trade union demands for higher income taxes in the December Budget because "further increases in the tax burden will hamper enterprise and growth prospects. We have made it clear that there is no room for manoeuvre in raising income tax rates next year." At long last, Cowen states the obvious and commits himself to defending it: taxes cannot rise because the economy would be damaged.

That one sentence was a hammer blow to any lingering hopes that the trade union movement had cherished of rescuing their place at the Government's table. Social partnership is dead, even if Cowen will be reluctant to read the last rites. He and elements within the department of the Taoiseach (which has grown fat and powerful on the back of social partnership) still hanker after its cosiness, but there is no place for it when real work has to be done.

David Begg and Jack O'Connor, the leaders of the union movement, had better get used to life outside the power circle. No more involvement in policy, no more shoulder-rubbing with political power, no more opportunities to wage class war from within that circle. From now on they are outside looking in, agitating in the streets and on the airwaves, their arguments exposed to ridicule and rejection like everybody else.

O'Connor faced that new reality last Monday night on RTE's Frontline, squirming with discomfort as the audience laughed at him before, in desperation, he sought their sympathy by having a go at Pat Kenny's home. Big mistake. Cowen will still make empty references to social partnership because he has been conditioned by it and by his departmental officials, and Cowen is a reluctant convert to economic realism. In the same speech on Thursday he said (in language that appeared to come straight from a civil servant) that it is "important for the voice of the social partners at EU level to contribute to the formulation of a vision for an economically revitalised Union. The outworking of a deeper contribution by the social partners to economic recovery... should be evident in policies and programmes both legislative and non-legislative, be they in the economic, environmental or social spheres."

The crucial difference, though, is that the partners now get the meaningless rhetoric while the economy and its problems get the serious, staccato treatment. On the crucial issue of public sector reform, Cowen was almost succinct: "We need a public service which represents value for money and is affordable to those whom it serves... which responds to the needs of citizens... which has the resilience to cope with changed circumstances... and which espouses the values of integrity, probity and fairness... It is not enough for our public service to change; it must also lead by example.

"This is what our citizens are entitled to expect... If we are to maintain public services to the highest standards possible, the organisations and people that deliver them must change."

His next step is straightforward. Cowen must appoint a senior minister for public sector reform -- Batt O'Keeffe or Dermot Ahern -- and give them the authority to drive through a radical reform within a tight timeframe of the next three years.

Everything should be up for change: work practices, contracts of employment, working hours, pensions, organisation, leadership, pay and the numbers employed. Change will not happen without active management: the public sector needs agents of change, not advocates for change. Reform can deliver significant savings, but it will deliver a better public service.

Cowen must also tackle the rest of the sheltered areas of the economy -- the OECD is right to advocate implementing tougher competition law and a war against the costs of the professions.

Privatisation, forever long-fingered because the trade unions would not wear it, must be rolled out, both to raise money and to breathe life and competitiveness into the economy.

National renewal will require more than economic action and public sector reform -- there is a desperate need for political and constitutional reform on a grand scale, sweeping away the discredited old regime to create a new republic with a new constitution and a new, lean, transparent democracy.

Cowen should shut down government departments that serve no useful function -- or at least none that could be served within another department. No more Martin Cullen and the Department of Arts, Sport and Tourism; no more Eamon O Cuiv and the Department of the Community; and in the spirit of leading from the top, no more Department of the Taoiseach. All he needs is a secretariat, not a department. Its functions could be handed over to the Department of Finance, removing any uncertainty about who actually runs the country's finances.

These are not new ideas, or particularly radical ones, but they all get lost in the sclerosis of current Irish politics, which is designed to benefit those on the inside who most resist change. December's Budget has to be just the start of a multi-year campaign. It must be ferocious, painful and seismic, but it must also set in train deep, radical reform of the entire business of government. The risks of failure cannot be overstated: Ireland is but a false step away from an economic abyss, and no amount of grandstanding from Begg, O'Connor and the soon-to-be-powerless trade unions can be allowed to obscure reality. The sirens are sounding -- this is not a drill.

- Alan Ruddock

Sunday Independent