The Taoiseach Brian Cowen has said the Government faces a new set of circumstances in dealing with the economy.

Mr Cowen said because of the way the country had adapted to prosperity in the past 12 years, people were aware of the steps that must be taken now.

In an interview on the Late Late Show last night, the Taoiseach said that, in the past, when the country had to face challenges, the economy was not in the healthy and prepared state that it was in now.

Deterioration of economy 'not unique'

The Minister for Finance Brian Lenihan has said the speed with which the economy has deteriorated is striking but is not unique to Ireland.

Speaking on RTE's Saturday View, Mr Lenihan outlined three main external factors impacting on the Irish economy, including the credit crunch in the banking sector, the high price of oil and the strength of the Euro.

He said the downturn in construction was a key local factor on which international trends have impacted.

Mr Lenihan said the measures in the forthcoming budget were the right ones to see out the current storm.

Meanwhile, Fine Gael's finance spokesperson, Richard Bruton said the Government must take responsibility for reform of the public sector, including the introduction of a pay freeze and setting performance targets.

He said that while there is public recognition of the existence of external factors on the economy, the Government had close ties with the property sector.