Taoiseach Enda Kenny has said the Government has the power to legislate for pay cuts in the public service if a new agreement with unions cannot be reached.

He said the Government wanted to achieve €1bn in savings over the next three years and the aim of talks with unions was to reach this by agreement and consent.

But if this could not be done the Government always reserved the right to introduce legislation to achieve the savings by cutting pay.

Speaking on RTÉ's The Week in Politics, Mr Kenny also rejected criticisms of the property tax by some Fine Gael Dublin TDs.

He said the tax was an alternative to income tax increases that would have damaged job creation.

Mr Kenny said people now have certainty that they will pay half the tax this year and that water charges are also on the way.

Govt confident of promissory deal

Mr Kenny reiterated the Government is confident that a deal can also be reached by the end of March on restructuring the terms for the promissory note debts of the former Anglo Irish Bank.

The Taoiseach said he wanted to see a situation where this agreement was concluded before the next payment of €3bn falls due at the end of March.

Under the current arrangement he said the Government was obliged to pay back €3bn annually over the next decade.

The Government wants the terms changed to allow a much longer repayment period at lower amounts.

Meanwhile, Tánaiste Eamon Gilmore said that he expects the Government will be able to conclude negotiations on the former Anglo Irish Bank debt with the European Central Bank before 31 March.

Speaking on RTÉ’s This Week, Mr Gilmore said restructuring the promissory note terms was the Government's immediate priority.