Minister for Finance Paschal Donohoe has said there is one pot of money, taxes, to pay for everything and ultimately there must be a balance between spending and the level of borrowing that the country has.
He said the offer of 2.5% at public sector pay talks is part of that balance.
Mr Donohoe said he and Minister for Public Expenditure Michael McGrath have to get the balance right between responding to the cost of living challenges that public servants are facing, but also giving the Government the ability to meet all of the other non-pay demands that will be faced in 2023.
Speaking on RTÉ's Today with Claire Byrne, he said the Government "stands ready to engage with our trade union representatives at any point in the coming days through the Workplace Relations Commission."
However, he said that public sector workers are affected by cost-of-living increase like most other people in the country.
"The challenges that our public servants are facing are also faced by those who work in the private sector," Mr Donohoe said.
"They're also faced by those, for example, who may be reliant on the state pension and may not be working at all, and to all of the other parts and levels of our society in our economy," he stated.
"We also have a duty to them to be able to respond back to the needs that they will have as we deal with the shock of a war which is affecting Ireland and the rest of the world. And that is the balance which Minister McGrath and I strive to get right at all times," he added.
He said he hopes to be able to reach agreement in the Workplace Relations Commission "if compromise can be found."
The Minister for Finance also said that while his focus is on delivering a Budget in October that can make a difference to the cost of living, there are also limits to what he can do.
Paschal Donohoe said all his focus now is on preparing for the Budget.
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The Minister said he is aiming to deliver a Budget in October that can make a difference to the cost of living and recognises the pressures and challenges that many are facing.
He said he fully appreciates the challenges that many people are facing at present such as "the rising cost of living, the rising cost of fuel and even food" and that money is being spent now to ease the financial burden being put on people.
"Since the start of the year, we have spent €1.4 billion on top of the measures we announced last October to cut VAT, to cut excise, to make additional payments available for those who are at risk of fuel poverty and then the €200 energy credit," he stated.
"We are spending that money now, to help now," he said.
Minister Donohoe said he is well aware of the calls for targeted measures to be introduced.
"But that is why we have brought in measures such as additional payments through the Department of Social Protection to help those at risk of fuel poverty," he added.
He described the current challenge as "broad based" and said that some of the measures also need to be broad based.
"When we are facing a challenge as broad based as we are with the change in inflation, it is appropriate that some of the measures that we bring are also broad based too. If you look at the root cause of this, which for now is the impact on the price of energy due to Putin's war on Ukraine, the best and most effective way of responding back to that is how we change the tax on energy," he said.
Minister Donohoe said the measures that have been introduced from an excise point of view "are the biggest of their kind that we have done in the recent economic history of Ireland and are a multiple of what is being done in our nearest neighbour, the UK".
He said he does not intend to introduce more measures between now and next October.
"I am not planning any further measures between now and doing the Budget. The Summer Economic Statement will be a measure that will lay out what are the economic resources that are available to our country and what I believe is the right budgetary strategy," he told RTÉ.