The Chief-of-Staff of the Defence Forces, Lieut Gen David Stapleton, is to give a formal response "within the next few weeks" to a Government-commissioned report on the future of the Naval Service and the Air Corps.
The report, compiled by consultants Price Waterhouse, recommended a £235 million re-equipment of the two services, additional staff for the Naval Service and a reduction in Air Corps personnel.
The Minister for Defence, Mr Smith, said last night the proposals from Lieut Gen Stapleton "would be considered in the context of the forthcoming White Paper on Defence".
Mr Smith also rejected a report in yesterday's Evening Herald that he was planning to disband the Air Corps and the Naval Service.
He said both were "on a positive developmental phase with ongoing recruitment and the acquisition of necessary equipment".
The Minister said no such proposals were being considered. Lieut Gen Stapleton said the content of the newspaper article was "at variance with the massive investment in personnel and equipment for the Air Corps and Naval Service already sanctioned by Government".
He said the article would cause "undue anxiety to [Defence Forces] personnel" along with "unnecessary stress and worry for the families of these personnel".
The Labour Party's spokesman on defence, Mr Jack Wall, said that Ireland's proposed membership of the NATO-led Partnership for Peace would inevitably require a well-equipped force.
He said: "The minister cannot simply deny another story by a reporter ha has given extensive comments to".
The White Paper on Defence is due to be published by the end of the year. In a submission, as part of the consultative process on the White Paper, the Department of Finance proposed significant cutbacks in the Defence Forces.
These included a reduction in the size of the Army and the amalgamation of the Air Corps and Naval Service into a coastguard service.