The Tβnaiste, Ms Harney, has described as a "huge blow" the decision by a US technology company to defer a promised 800-job investment in Cavan town. Teradyne, a supplier of equipment to the telecoms industry, has deferred the investment indefinitely following losses of over $50 million (€55 million) in the third quarter of this year.

Speaking at an investment conference in Galway, the Tβnaiste said she had asked the IDA to stay in close contact with the company. Teradyne employs 250 people in Dublin and had already taken on 42 employees in Cavan.

Ms Harney also told the conference that the Government would not lower the top rate of income tax from 42 per cent to 40 per cent in the next Budget. The Tβnaiste told the investment conference that tax reductions would instead concentrate on the lower paid, to ensure that the Irish economy remained competitive. The Government was concerned that wages made up to 50 per cent of production costs in some areas. This was "unsustainable" in the long term, when competing against low wage countries, she said.

Government sources played down the significance of the Tβnaiste's comments on the Budget last night, and a spokesman stressed she was not speaking on behalf of the Minister for Finance. Her comments on the higher rate of tax were only a reiteration of remarks made earlier this year, according to sources.

Ms Harney added that the Government was reviewing the number of work permits issued to foreign nationals in view of the economic downturn. A restrictive approach was already being taken, and the level of work permits being granted would "contract significantly", she told the conference, hosted by HC Financial Services.

The Department of Enterprise and Employment said last night that 26,000 permits and visas had been issued to date this year, compared to 20,000 in total last year and 6,500 in 1999.

The increase this year was approved in response to employers' demands, but a spokesman said that it was "always the case that this would be reviewed in the event of a downturn situation".

Ms Harney said she was very concerned about the current job losses, but that the Irish economy was in a state of "slowdown" rather than "recession". She expected to be able to make announcements about expansions in several sectors, including medical devices, in the next couple of months.

It was important "not to talk ourselves into a crisis", she said, as the fundamentals of the economy were very strong.