THE IMF contacted the Government expressing concerns about reports of instability within the Coalition, the Irish Independent has learned.
In a sign of the damaging effect of speculation from within the Coalition about a general election, IMF officials had to be reassured, in recent days, that there was no split in the Government.
But the tensions within the Coalition continued last night as ministers made a U-turn on one of the controversial health cuts.
And Fine Gael and Labour ministers offered differing views on the Croke Park Agreement.
Cuts to personal assistant services costing €10m will be reversed with the savings to be found in administration and training in the disability sector.
The reports of instability within the Coalition came at a bad time for the Government as negotiations on a bank debt deal intensify in Europe.
Senior financial sources said there were "concerns expressed" by the IMF following reports in the international media, including the 'Financial Times', of talk of a snap election and the row within the Government over the health cuts.
The Government dismissed the speculation about an election and reassured the IMF that it would continue to meet its budgetary targets.
The contacts were initiated by IMF permanent representatives in Dublin.
Informed sources said they were not surprised by the intervention saying it was "the job" of the IMF office in Dublin to monitor any economic and political developments.
The IMF representatives are based in the Central Bank's office on Dame Street, but are not on the staff of the bank or the Department of Finance.
"It is their job to keep up to speed and report to IMF HQ on local developments -- financial, economic and political," a source said.
Last weekend, Labour chairman Colm Keaveney said his party should prepare for a snap election.
The timing of the controversy comes at a particularly bad time for the Government as it prepares to strike a deal on lowering the bank-debt burden.
Finance Minister Michael Noonan is due to attend a meeting of EU finance ministers in Cyprus next week where a proposal is expected to be tabled.
Taoiseach Enda Kenny and Tanaiste Eamon Gilmore aimed to calm the dissent within the Government yesterday.
The Coalition initiated a partial climbdown on one of Health Minister James Reilly's health cuts with a pledge to look at the €10m cut in the disability assistance allowance.
However, the poor communication concerning the health cuts continued with the U-turn as Dr Reilly's department was unable to answer basic questions on the change.
Protests against the disability cuts were held outside Government Buildings during yesterday's cabinet meeting.
Only the €10m in personal assistant cuts will be reversed, but it was stressed that any changes will have to be made up elsewhere in the disability budget.
The Cabinet also thrashed out their differences over the Croke Park Agreement.
Fine Gael ministers expressed their various issues with the agreement, which protects public sector pay, and the slow pace of reform.
But Labour ministers said the agreement was working, and strikes and non-co-operation within the public sector would be worse.
At the end of the discussion, there was no change in policy as ministers agreed to continue with the agreement in its current form.
Public Spending Minister Brendan Howlin's report on allowances paid to public sector workers was not discussed at the meeting. Mr Kenny and Mr Gilmore moved to ease the tension over the planned health cuts.
Mr Kenny declared the "silly season is now over" as he dismissed talk of tensions within the Coalition over health cuts.
Arriving into Government Buildings ahead of yesterday afternoon's cabinet meeting, the first after the summer break, Mr Kenny said the Government had to get on with the job and had difficult decisions to make.
He warned that the forthcoming Budget will be the most challenging for the Government.
Mr Gilmore attacked Fianna Fail for its criticism of Dr Reilly.
The opposition party is putting down a motion of no confidence in him.
Mr Gilmore said Fianna Fail had a "hard neck" to be criticising the health system.