The Minister for Finance, Mr McCreevy, has not ruled out raiding the Central Bank's €6 billion foreign currency reserves in the forthcoming Budget.

Such a move would ease pressure on the Minister to implement less palatable measures such as tax increases as he seeks to recover a projected tax shortfall of €1.3 billion and limit borrowing to €750 million.

Mr McCreevy attempted to access the reserves when drawing up last year's budget, but was thwarted by the interest of the European Central Bank (ECB) in deciding how the money should be treated.

The Minister declined to reveal yesterday whether he had initiated talks with the ECB on the issue since then.

It is known however that the ECB is currently in the midst of a review of foreign currency reserves held in central banks across the euro zone. It is possible that this review will result in national authorities having a lower reserve requirement.

Economists suggested at the weekend that existing foreign currency reserves held at the Central Bank could be used to cover contributions to the National Pensions Reserve Fund, transfers that are set at 1 per cent of GNP each year.

Last year, the Minister succeeded in drawing €610 million from the Central Bank in the form of profits on coins and a one-off boost due to the euro changeover.

Speaking to reporters after addressing the Leinster Society of Chartered Accountants, the Minister did not comment directly on speculation that he was planning a further €800 million in cuts before the end of the year.

He said, however, that "people are just adding up" based on publicly available information.

He said that the secret memo published last month that projected €900 million in cuts had been based on a better economic picture and that it was sensible to presume that further cuts would now be required.

The budgetary situation is now "more difficult than envisaged", said the Minister, intimating that he would soon be revising his growth forecasts for the year downwards to take account of this.

He nonetheless insisted that "there is no crisis in the public finances".

Mr McCreevy reaffirmed his intention to bring public spending within a 14 per cent target by the end of the year, a goal which has generated speculation that some projects will simply be pushed into 2003 rather than being included in this year's numbers.

He said that "unavoidable" expenditure would have to be met under any circumstances.

The Minister declined to elaborate on how his target would be achieved, also refusing to comment on the possibility of a freeze in public-sector recruitment.

He said however that pay increases paid to Irish workers must "take account of the wage and inflation levels in our competitor countries".

No individual group of public- sector workers should expect to negotiate a wage settlement outside talks on a successor to the Programme for Prosperity and Fairness, according to Mr McCreevy.

"We're going to have to live within the figures," he said, adding that "no sane Minister for Finance ever signals what he might do before Budget Day".

In his address, Mr McCreevy said that the Government would be taking "decisive and corrective action" on the public finances in the Budget.

"In simple terms, we can only spend when we have it," said Mr McCreevy, adding that he would be exploring measures to ensure that public spending delivers value and stays "within target" in the future.

The Labour spokesman on finance, Mr Brendan Howlin later described Mr McCreevy's comments on spending as "extraordinarily glib and self-serving".