The Department of Finance told the new government it believed there was scope, through dialogue, for the Government to 'review and modify' aspects of the bail-out programme agreed with the EU and IMF.
The department warned, however, that Ireland must meet the fundamental conditions laid down in the programme to ensure that the State would be funded.
The views were contained in a briefing note to incoming Finance Minister Michael Noonan published on the department's website. Some parts of the document have been blacked out.
The documents also contain the department's views on the policy options in all areas of spending, including health and social welfare.
The department pointed out that the EU and IMF had to be told of any proposals to deviate from the bail-out programme, and that in such cases, alternative measures had to be identified.
The note said that the main objectives of government policy should be to support domestic confidence and start restoring international confidence in the economy. It said cutting the budget deficit, stabilising the banks, improving competitiveness and bringing in measures to help employment were essential for this.
It warned that difficult decisions would be needed in all areas, including 'firm control' of public service pay and numbers, cutting spending programmes and scrapping large capital projects first proposed during the boom.
On the banks, the department note - written before last week's announcement of the outcome of stress tests - said that any policies had to recognise Ireland's dependency on the ECB 'and the implications this has for our room for manoeuvre and capacity for independent action'. It said burden-sharing with bondholders had 'limited potential' to reduce the costs of fixing the banks.
Most of department secretary-general Kevin Cardiff's note on debt sustainability has been blacked out, as has the section on NAMA. Any information on the views of Ireland's EU partners has also been blacked out.
The report also reveals that when the previous minister Brian Lenihan halted the €10 billion injection of capital into the banks in February, the state instead placed €6 billion on deposit with three institutions - €4.2 billion with AIB, €1.4 billion with Bank of Ireland and €300m with EBS. It did not state the source of these funds.
The tax section of the document said there was scope for changes in the VAT system, with options including a new low rate for currently zero-rated goods such as food, oral medicines and books, and a lower rate for some currently taxed at 13.5%, such as residential housing and general repairs and maintenance.
The department also said it believed the effect of the €10 air travel tax on passenger numbers was overstated. The tax was cut to €3 in the last Budget.
Further savings in the social welfare budget are going to be required in future years, according to the Department of Finance briefing documents.
Child benefit for high earners 'difficult to justify'
The documents also say that social welfare transfers to higher earners through child benefit are difficult to justify - and that the system needs to be amended to target those dependent on welfare and low earners.
But they also state that continuing entitlement to concurrent payments of more than one principal social welfare payment will also require review.
For example, the introduction in 2007 of an entitlement to half-rate carer's allowance payment in conjunction with another welfare payment had a 'relatively complex' impact on the number of recipients and overall expenditure. The department says the payment of half-rate jobseeker's benefit or illness benefit to recipients of One Parent Family Payment also requires review.
The documents say that employment must be incentivised, and long-term dependence on social welfare must be discouraged. The Department notes recommend a single social assistance payment for the 500,000 recipients of working age, as well as increased participation in labour activation measures, and streamlining of means testing.
Warning on universal health insurance costs
The Department of Health is seeking savings of €420m and staff cuts of close to 9,000 by 2014 - according to Department of Finance briefing notes for incoming Minister Michael Noonan.
The department warns that projects may need to be re-prioritised or delayed. It advocates reviewing eligibility for services and the use of co-payments by service users on the basis of affordability, as well as access based on need.
It also recommends tackling barriers and anti-competitive practices in the public and private systems to ensure service users and providers are not subsidised unnecessarily from the public purse.
The note warns that the introduction of a universal health insurance system - whether public or private - could push up the cost of public health care because of a corresponding expectation of universal entitlement to care.
It says the ability to pitch and collect a universal insurance payment at a sufficiently high level to fund universal entitlements to health care may be constrained for some time by declining household incomes.
It says the public-private mix of health service provision needs to be reviewed to ensure public spending is providing value for money, that access to services is based on need and affordability, and that private provision is self-sustainable, with common minimum standards of care.
It also says the future of the remaining hospital co-location projects will need to be reviewed. It says the overall state of private health provision, private health insurance, the banking crisis and changing policy on tax reliefs must raise serious issues about the viability of such projects.
Department wants more education savings
Further savings will have to be targeted in education to meet the savings target of €379m by 2014, according to Department of Finance briefing documents.
They state that the reforms agreed under the Croke Park Agreement - including the extra hour a week from teachers - will deliver only deliver €39m. This is less than 0.5% of total current education spending.
The documents also say it is difficult to envisage proceeding with the break-up of the three state airports at Dublin, Cork and Shannon in the current business environment. The Minister for Transport was due to make a decision on this in 2011.
Meanwhile, the Department of Finance has confirmed that the National Oil Reserves Agency is the one non-commerical state sponsored body that has not acted to date upon a Government request to suspend bonus payments indefinitely.