LAST week's warning from the Organisation for Economic Cooperation and Development could not have been clearer: government spending, which has risen by 50 per cent in real, inflation-adjusted terms over the past five years, "cannot be sustained and must now be adjusted". Brian Cowen, the Taoiseach, and his Government cannot choose to ignore that warning.

The public finances are in severe deficit, with government spending outstripping its income by more than €22bn a year, as tax revenues have evaporated in the heat of the recession. That cannot continue. The Government has no option but to heed the OECD's warning and cut its cloth to fit today's grim economic reality.

It will reveal its response to Ireland's crisis in next month's Budget, and it is vital that Mr Cowen and Brian Lenihan, the Minister for Finance, find the political courage to make the necessary spending cuts. If they do, they will signal the start of our economic recovery by showing the world that Ireland has the strength of purpose to tackle its own difficulties with resolve and conviction.

The consequences, however, of taking the appropriate action will be undeniably painful for everyone in this country. To reduce its spending, the Government must cut the biggest areas of spending, and that means that it cannot avoid deep cuts in public sector pay and in social welfare. All government spending will feel the blade, from health to education, from arts to sports, but it is in the twin areas of public sector pay and social welfare that the heaviest cuts will have to be made.

The leaders of the trade union movement argue that those cuts will be unfair because they will target the most vulnerable people in society. They claim that the pain could be eased by spreading it over many more years, and demand dramatically higher taxes on middle and high earners as an alternative to the cuts.

They are wrong on all counts. Ireland cannot afford to delay corrective action because the more our debts accumulate, the more we must spend on servicing those debts. In a horribly short space of time all our tax revenues would be consumed by debt interest payments, and the financial markets would turn their backs. The emptiness of the unions' position is clearly underlined by the fact that Eamon Gilmore, the leader of the Labour Party, agrees that delay is not an option.

Pay cuts and social welfare cuts will cause pain, but they come against a backdrop of deflation that means that actual standards of living will not deteriorate. Just as significantly, both public sector pay and social welfare have enjoyed significant real increases over the past nine years. The public sector is now paid substantially more than the private sector, while social welfare rates have increased by up to 60 per cent in real, inflation-adjusted, terms since 2000. The cuts will, unfortunately, add to those deflationary pressures, but they will not cause as much harm as a series of tax increases on an economy in recession.

The choice is not a pleasant one for any government to take, but it cannot be avoided. The fundamental problem for the Government is that no matter how strong or how swift the economic recovery, current levels of government spending are not sustainable. They are based on an economy that no longer exists, and a large part of that economy -- the construction sector -- will not return. Spending must fall in line with the new economy and there is no pain-free way of achieving that adjustment.

The good news, however, is that a tough Budget will help to restore confidence in the economy. Every person in this country needs to believe that the Government has put the national interest at the heart of its policies, that it has a clear plan and the confidence to execute it. Once confidence, now fragile, starts to recover, then the path to economic renewal will become clearer. There is much to be done, and none of it is easy, but one thing is abundantly clear: the time for talking and dithering has come to an end. This Government has wasted more than a year, first refusing to acknowledge the crisis and then refusing to deal with it. Each wasted day has cost jobs and delayed the point of recovery. Now, with the OECD's warning ringing in its ears, there can be no more delay. The painful surgery must begin so that the patient can recover.

Sunday Independent