Minister for Public Expenditure Paschal Donohoe has described a pay offer made to public sector unions as very fair and very significant.
He said the proposals would see wages increase by around 8.5% over two-and-a-half years.
Unions however said the offer was not credible as it failed to recognise that there had been a shortfall in pay against inflation in the previous pay agreement.
Mr Donohoe said the pay increase package is worth €2.9 billion and added that the lowest paid public sector workers would see their pay increase by 12% during the period of the agreement.
He called on the unions to reflect on the offer made during talks which broke up without agreement shortly after 2am this morning.
He added that the process is not over and that the Government is willing to engage in further discussions.
The current pay offer is worth around 8.5% over two-and-a-half years but it is understood unions sought cumulative increases worth around 12.5%.
Unions and staff associations met at the Irish Congress of Trade Unions to discuss the pay offer and branded the proposals "extremely disappointing".
General Secretary of Fórsa and lead union negotiator Kevin Callinan said the pay offer had failed to meet the basic test of dealing with the cumulative gap between wages and inflation, which he said amounted to almost 19% over the last three years.
"The Government has effectively undermined its own approach to negotiating a multi-year public service pay agreement in a number of ways," Mr Callinan said.
"In contrast to its recent measures to address the cost-of-living challenge on the National Minimum Wage and social protection payments, where it has demonstrated a real pragmatism, its approach to completing a public service pay agreement lacks credibility," he added.
Unions finalised the wording of ballots for industrial action and said they are poised to use them should it become necessary in the coming days.
The previous public sector pay agreement, Building Momentum, expired at the end of last year and talks before Christmas failed to reach agreement on a successor deal.
Public sector trade unions had criticised the slow pace of the negotiations and threatened industrial action.
Last month, as part of the pay talks, the Government agreed to repeal emergency industrial relations legislation introduced during the financial crisis.
Unions had asked for the removal of the legislation claiming it had made it too difficult for individual sectors and grades to have issues addressed outside of the scope of existing pay deals.
If a new agreement is reached, it will mean a pay increase for 385,000 public servants including nurses, doctors, gardaí and teachers.
