A key component of the government's re-election strategy, Transforming Ireland: A Better Quality Of Life For All, will run until 2013. The plan will be funded almost entirely from government resources.

Cowen is forecasting annual 4% to 4.5% GNP growth over the next seven years.

Against this background he wants average annual spending on capital projects of 5.5% of GNP until 2013. The finance minister believes ambitious infrastructure investment must happen given the future demands for pension and health provision.

"Our window of opportunity is the next decade. We can increase the public wealth by way of improved social and capital infrastructure developments. There should not be a fear factor, " a senior government source argued.

A significant amount of an unallocated Euro5bn fund will be spent on cross-border projects even beyond the areas in the Belfast Agreement.

Local authorities will be invited to compete against each other for extra funding for pet project ideas.

There is confidence in government circles that recent changes will ensure projects are delivered on time and within budget.

"The economy can take this increased capital spending.

We don't see an inflationary impact. There will be no repeat of the previous experience, " the source said.