Public sector workers face pay cuts after the Government rejected an alternative union proposal including 12 days of unpaid annual leave for each worker next year.
Taoiseach Brian Cowen said the proposal did not provide an acceptable alternative and that the Government would have to proceed with its plan to reduce the pay and pensions bill by €1.3 billion.
David Begg, General Secretary of the Irish Congress of Trade Unions, said the Government had pulled the plug on attempts to build a social solidarity budget and he warned of likely opposition to next week's Budget.
Many unions have expressed disappointment with the collapse of the talks, saying it was a squandered opportunity. They warned of the possibility of further industrial unrest.
Unions will be meeting over the weekend and on Monday to consider their options.
Trade union leaders have disputed Mr Cowen's assertion that their proposed measures would not have delivered savings of €1.3 billion.
At a press conference, General Secretary of IMPACT Peter McLoone said, 'I cannot see anyway how they [the Government] could make that statement. That is shifting the goal posts.'
The Taoiseach said he still believes in partnership despite the breakdown in talks with the trade unions. He said he was disappointed the partners were not able to find the basis for agreement on this occasion, and that the parties should work together even if they could not agree on this particular issue.
On RTÉ's Six One news, Mr Cowen said the Government would probably have to see a reduction of about 5% or 6% in public service pay this year. He said that would be announced in the Budget.
Mr Cowen said it was unfortunate that it was suggested that a deal with the unions on unpaid leave had been reached earlier this week because the Government had not agreed a deal.
