IT was Albert Reynolds who famously said it was "the little things that trip you up" and this weekend the comment looks as appropriate as ever.

Of course, to the pensioners worried about losing their medical cards, this is certainly not a small matter. But in the context of a budget that cut €3bn in spending and raised €2bn in taxes and levies, the potential €100m saving from the ending of the automatic right of those over 70 to a medical card looks pretty small.

Economically and,
arguably, even ethically – despite what Joe Behan and other opposition TDs would claim – there was a justification for ending a scheme that was hugely lucrative for well-off GPs and which put retired high court judges on the same scale of benefits as social welfare recipients.

The government may well be right in saying this nettle had to be grasped, that financially the universal cover was unsustainable. But, politically, it was disastrously handled and the magnitude of the negative fall-out for the government has been barely believable. Bad enough to take away a benefit that had been given to elderly people just seven years earlier. But then to compound it by a complete breakdown in communication that caused confusion and panic was unforgivable.

Serious question marks have been raised about the political judgement of Brian Cowen, Brian Lenihan and Mary Harney. Yes, they had horribly tough decisions to make. But how could they not have seen the backlash coming? And how could they have been so unprepared when it did arrive?

The number of people who would be left without a medical card, a doctor's card or the €400 compensation payment was just 20,000 out of 355,000. But the information vacuum meant that by Thursday even many of those who were totally unaffected by the change were scared that they were losing their medical card. It was a PR disaster, comparable only to John Bruton's infamous 'VAT on children's shoes' budget of 1982 that brought down a government. This decision won't bring down the government but the omens are bad.

The government has succeeded in alienating a group of people that not only votes in high numbers but tends to vote predominantly for Fianna Fáil. "Shooting ourselves in the foot" and "politically naive" were just two of the terms used by government TDs.

Calls of complaint

Those TDs having been getting it in the neck from constituents – many of them reporting unprecedented levels of calls of complaint coming into their local offices. It was no surprise therefore that Thursday's parliamentary party meeting was a fairly heated affair. But the level of unrest since has rocked the government to its foundations and shaken confidence in its ability to survive the stormy months that inevitably lie ahead.

Panic is the only way to describe the government's reaction to the unfolding crisis from the middle of last week on. Nobody seemed to know what was going to happen next. Immediately after the parliamentary party meeting, chief whip Pat Carey told journalists that there would be no rowing back, other than some minor tweaking to take account of inflation. "The decision stands," he said.

However, within a couple of hours, it was announced that the thresholds for eligibility for medical cards and the doctors-only cards were being raised by in the region of 20%, which means that those on the state contributory pension would still be entitled to a medical card.

It should have bought the government some breathing space. But any potential positive PR was blown away by the Department of Health's declaration that the decision would have no impact on the €100m it hoped to save from the ending of the automatic medical card for over 70s. "They increased the threshold and then said it would make no difference. It would have made a difference, of course it would, but they screwed it up by saying that. The government has had two or three stabs at addressing this and every time they've handled it badly," said one angry government TD.

Far from gaining breathing space by the decision to raise the thresholds, the pressure on the government rose to near breaking point on Friday. TDs such as Mattie McGrath, Jim McDaid, Tom Kitt and Noel O'Flynn were vocal in their opposition. On Friday morning, Tánaiste Mary Coughlan met five backbench TDs – Michael McGrath, Michael Moynihan, Christy O'Sullivan, Thomas Byrne and Michael Kennedy – who passed on the concerns of their constituents. But any doubts that Taoiseach Brian Cowen had an open revolt of backbenchers were firmly put to bed when largely unknown Wicklow TD Joe Behan made his shock announcement that he was resigning the Fianna Fáil whip. Behan's criticism of the cabinet for being out of touch was stinging. People in Dáil Éireann will be bewildered by his decision to walk away – it raises questions about what he thought he was signing up for when he agreed to stand for a political party – but his words may have resonance among the public.

Error of judgement

The feeling in Dáil Éireann on Friday was that something had to give was only compounded by the concerns expressed by government-supporting Independents Michael Lowry and Finian McGrath – who had spotted the difficulties in this measure early in the week – and Green TD Mary White's comments on RTÉ news. While White chose her words carefully, she made it clear the Greens couldn't wear the current situation. She was merely echoing what many in Fianna Fáil thought. "We made an error of judgement and we should be big enough to admit it," Mattie McGrath told the Sunday Tribune. By late Friday afternoon, most Fianna Fáil backbench TDs were privately confident that some kind of change was in the offing. Speculation focused on the proposal being parked with the doctors' body, the IMO, being asked to renegotiate the infamous deal it agreed with the government in 2001, when it secured the payment of €610 per new medical card patient over 70.

The Taoiseach tried to diffuse the crisis by suggesting on RTÉ's Nine O'Clock news that compromise could be possible. He offered to engage in talks with the medical profession to establish if the government's scheme could be modified to allow more people retain their medical cards.

It was a potential light at the end of the tunnel for the government and it may buy it some time. But problems remain. In any talks, the government will be dependent on the goodwill of the IMO to agree a compromise deal. If the IMO decide to hang tough – as it did seven years ago – there is nothing it can do.

Another possible solution – leaving those currently over 70 with the medical card but closing off the automatic entitlement for future generations – has apparently been ruled out by the Attorney General because it was discriminatory.

Finally, given the state of the public finances any change will have to go at least some way towards meeting the Department of Health's need to make a saving of €100m. Cowen also re-emphasised on Friday night that the principle of automatic entitlement of all people over 70 to a medical card will have to go. Many people are going to be left unhappy regardless of what compromise is agreed.

The really frustrating thing for TDs is that, but for the medical card fiasco and a decision to apply the 1% income levy across all sectors, including those earning below €25,000, the government would have been largely "home free" from the toughest budget in a quarter of a century.

"It's infuriating," said one TD. "Those two decisions effectively raised Mickey Mouse money and in the process they undermined a reasonably good budget."

Long-lasting damage

The heat will eventually be drawn from this controversy, but the worry for the government is that the damage will be long lasting. Cowen and Lenihan, in particular with their authoritative handling of the banking crisis, had done much to restore confidence among nervous Fianna Fáil TDs and the wider electorate. All that progress has been wiped out in a matter of days and the mutterings in Fianna Fáil about the leadership have started again.

It's potentially three-and-a-half years to a general election – an eternity in politics. But against the backdrop of Lisbon, the banking crisis, recession and plummeting public finances, that election is already looking unwinnable for Fianna Fáil. Its real worry is that the worst is yet to come. Despite the controversy, genuine questions remain as to whether Tuesday's budget was tough enough. There are concerns that the government's forecasts for tax revenue, consumer spending and unemployment are far too optimistic. If that is the case, then we ain't seen nothing yet in terms of cutbacks. And, after recent days, there must be doubts as to whether backbench TDs and the public have the stomach for what will be required.

Whatever way the deck is cut, the prospects for the government look unfeasibly grim. The parallels between it and the hapless Fine Gael and Labour government, which were in power during the last recession in the 1980s, seem to grow by the day. That government was finally put out of its misery in the 1987 general election. To have any chance at all of avoiding a similar fate, Fianna Fáil will have to rediscover some of its renowned political nous and quickly.