The Minister for Finance, Mr McCreevy, is expected to insist that any increase in Government spending next year should deliver quantifiable pre-election benefits to the Coalition.
As the Cabinet yesterday considered the impact on its spending plans of the deteriorating economic climate, economists warned growth is slowing so fast that quarterly rates could fall to zero by the end of the year.
Mr McCreevy is understood to be keen to stress to his colleagues that an open chequebook is available no longer and all proposed Government spending must have value for money and quality as its main determinants. "At the end of the day this process is about the election and nothing else," one observer noted.
Departments have begun the opening round of the Estimates process which outlines their proposed spending plans. However, Mr McCreevy will not be meeting his colleagues for bilaterals until next month. By then, the extent of the economic downturn should be clearer.
Mr Jim O'Leary, chief economist at Davy Stockbrokers, warned yesterday that economic growth may be flat at present and fall slightly in the last three months of the year.
He added: "If that is the case, then to generate an average annual growth rate of 5.5 per cent in GDP terms next year requires a pretty implausible strong recovery."
The ESRI's Prof John Fitzgerald is in broad agreement and warned there will be a significant slowdown this year which will continue into 2002.
But the Taoiseach, Mr Ahern, insisted that, while hard decisions would be taken in advance of the Budget, the economy was still performing very well. He said people should not "talk down the best economy in Europe", adding that it needed to be "managed through what is obviously a tightening position in one or two sectors".
The Taoiseach was responding to questions following the latest figures indicating that the Exchequer surplus of tax revenue over spending is likely to be £1 billion less than forecast at the beginning of the year.
Labour's finance spokesman, Mr Derek McDowell, said the Exchequer returns provided further evidence of the slowdown in economic growth that everyone knew would have to happen. "But the real tragedy is that as a result of this Government's mishandling of the economy we have little to show for the unprecedented level of economic growth over recent times," he said.
IBEC director general Mr Turlough O'Sullivan said the figures reflected the slowdown in economic activity but they were not a cause for alarm.