Taoiseach Brian Cowen has acknowledged that some of the cuts in its capital spending programme could be as much as 50% when compared to the original forecast under the 2007 National Development Plan.
In an interview on RTÉs Six-One News, Mr Cowen pointed out that the National Development Plan's figures were drawn up when forecasts for Ireland said the economy would expand by 4.5% a year.
Mr Cowen pointed out that the country did not have the resources it once had, and stressed that the new priority was job creation.
Earlier, the Government announced plans to spend €39 billion on infrastructure between now and 2016. The overall project has been cut by €1 billion for this year.
Among the revised proposals are plans to lease instead of building infrastructure and commitments to proceed with the Metro North project and the Dart Underground in Dublin.
Read more details on the plan here
Taoiseach Brian Cowen said proportionately it was one of the highest spends on capital in the EU.
He said the plans will indirectly create 270,000 jobs between now and 2016.
There is a commitment to Metro North, linking the Luas lines and the Dart Underground link, subject to final Government approval.
There are also spending plans for water services, schools, health and housing regeneration in Limerick and Ballymun in Dublin.
The programme includes €4.2 billion for education, including more than €3 billion to upgrade primary and secondary schools, with new schools also being built.
€3.5 billion will be invested in water infrastructure, with €880m for a 'retro-fit' programme to make houses and other building more energy efficient.
€1.2 billion goes to IDA Ireland and Enterprise Ireland to support businesses, while there is €1.5 billion for the agri-food and fishing industry, including €600m for forestry.
Delivery the test, says construction body
Business groups have generally welcomed the spending plan, with IBEC calling it 'a vote of confidence' in the economy.
The Construction Industry Federation (CIF) has welcomed what it called the certainty on capital spending provided by the launch of the programme, but warned that the test lay in the delivery of projects.
'Whilst today's announcement represents a significant reduction in funding as set out in the National Development (NDP), in the current economic environment the Government's commitment to maintain investment at €5.5 billion annually over the period 2011 to 2016 is welcome,' said Martin Whelan, the CIF's policy director.
Dublin Chamber of Commerce said the decision to include Metro North and DART Underground would reduce the huge cost of traffic congestion for Dublin businesses.
The Irish Congress of Trade Unions said the reduction in spending could have been worse, but added that the investment should have been much bigger. 'Ireland has a serious infrastructural deficit, mass unemployment in construction and related occupations and the wider economy needs a greater boost than this package will deliver, it said.
Irish Rural Link - which represents rural communities - said the plans showed 'a clear Dublin bias with inadequate investment planned for rural regions'.
