The public finances are in crisis. This year, the government is likely to be forced to borrow close to €25bn to run the country. That means we have to borrow €480m a week just to continue paying for public services, to recapitalise the banks and invest in infrastructure.

To put this in context, it is worth noting that the recent ESRI suggestion for an across-the-board cut of 20% in child benefit payments would save €500m in a full year. This suggestion prompted some of the mothers of Ireland to protest outside the Dáil last week. Yet the proposed saving would eliminate only one week's borrowing.

The government has given a commitment to reduce the borrowing requirement from around 12% of gross domestic product (GDP) this year to 3% by 2013. Given the magnitude of the recession, reducing borrowing by this amount will be extremely difficult and painful and will inevitably result in many more mothers and plenty more besides protesting outside the Dáil over the coming months. It does look as if we are in for a winter of discontent.

A deficit of the magnitude that is likely to be recorded this year is not sustainable. If we continue to borrow at this rate we will build up a debt legacy that will be a dead weight in the economy for decades. Interest payments alone will just suck resources out of the economy and further undermine our already less-than-adequate public services. We cannot and should not allow this happen; nor can we pass on this type of debt legacy to our children. As a country we simply have to live within our means. We are certainly not doing that at the moment.

While some tough measures have been introduced in the shape of the public sector pension levy and other levies that have been imposed on most workers, the impact on the burgeoning deficit has not been significant. In the first nine months of the year, the income tax take was down by 9.4% on the previous year and the VAT take was down 21.3%.

This suggests that the tax increases to date are now proving counterproductive, and having a negative impact on economic activity. Consequently, it is not clear that further tax increases are feasible, unless we want to hit the consumer further and totally undermine the tax take. There is no other option but to take the knife to spending, because we are spending much more than we should to run the country.

The report from the Comptroller and Auditor General last week suggested that 59% of those employed in the civil service in 2007 took sick leave and that the average total absence was just over 11 days. The cost of this was put at more than €64m. This revelation comes on top of lots of other evidence of wasteful spending over the past couple of years, not least Fás and politicians' expenses. This spending cannot be allowed continue.

The notion put forward by some trade unionists that we should adjust the public finances on a more gradual basis is just a cop-out and will only delay necessary reform of the way public services are delivered. Taxpayers are entitled to proper spending of our hard-earned money, and vested interests must not be allowed to stand in the way of necessary change. If some of those vested interests take to the streets and withdraw the labour of others, so be it. The government has no choice but to stand firm and do what needs to be done. If the government fails to do this or if it is prevented from doing this by interest groups, then we should all hope that Mary Harney's threat or promise of IMF intervention comes to pass.

Back in 1987 the threat of external forces pushed the political system into doing what needed to be done. We should hope that the same happens this time. Somebody needs to clean up the mess and if our political system doesn't, then here's hoping the IMF will.

Jim Power is chief economist with Friends First