DRASTIC times require drastic measures and, by God, are these drastic times.

Listening to the public-sector workers last week, it is quite clear that the penny hasn't dropped as to how much trouble the country is in. The various scenarios put forward by economic commentators – in relation to our banking sector and the knock-on cataclysmic impact on public finances – seemed overly doom-laden even a few weeks ago. No more. If we stopped our collective navel gazing for just a few minutes, we would realise that the international financial community is focusing on us and, to put it mildly, it does not like what it sees.

As of now, talk of the IMF or the EU having to intervene is premature. But the gut-churning worry is that it may not be premature for too much longer. Similar predictions in the 1980s proved groundless, but the difference this time around is the question marks hanging over our banking system and their exposure to the property sector.

The international markets are losing faith in the guarantee scheme. Anglo Irish Bank – or should that be 'Angola Irish' Bank? – has done untold damage to our international reputation. If we are not to become Iceland Mark II, radical action is needed and, in this context, the pension levy will be like a teddy bear's picnic.

It is wrong to say that the government hasn't taken tough decisions to date – even six months ago, the idea of reducing the take-home pay of public servants would have seemed unthinkable.

And there are well-grounded reasons why the government has put off major tax increases until next year, as it tried to maintain a tricky balancing act between shoring up the public finances and not completely shutting down the economy.

That balancing act cannot be completely cast aside. But, as NUI Galway economist Alan Ahearne points out, we have now probably reached the stage where the huge uncertainty and concern about the state of the public finances is causing more damage to economic activity than the impact of a cut in spending or higher taxes.

The government has to send out a strong, uncomplicated message, both to the international markets and the Irish public, that the public finances are under control. And we cannot afford to wait until next December's budget for that to happen. A mini-budget, doubling as a plan for national recovery, is required.

And that budget is going to have to tackle some previous 'untouchables'. First and foremost among them is the ludicrously small number of people paying tax in this country – 40% of all income earners in Ireland pay no tax whatsoever.

In the UK, a worker starts paying tax at €6,860. In Ireland the equivalent figure is nearly three times that at €18,300. A couple with one earner, with kids, can earn €32,000 without being liable for tax. Add in child benefit of around €11,000 a year for three children and it means you can have a de facto income of €43,000 without being liable for a cent in tax. That doesn't happen anywhere else in Europe.

Nobody is saying that lower earners should be paying large amounts of tax. But everybody will have to make a contribution, however small, because we simply cannot afford four in 10 workers to make no contribution towards services.

Of course, the top rate of income tax will also have to rise. It is worth pointing out, despite the rallying cry that the rich pay no tax – and the union's argument that the "pain must be spread evenly" – that the top 2.5% of earners pay a third of all income tax and those earning over €100,000 pay one half of the total income tax take.

Carbon taxes are inevitable and should be relatively straightforward to introduce. A property tax, although necessary, will be trickier to introduce and may need more time to plan.

The government will also have to bite the bullet on both third level fees and child benefit. The middle classes will kick and scream at the prospect, but we cannot afford to subsidise students from well-off homes getting free fees. Similarly, the fact that the same level of child benefit goes to every parent, regardless of their income, cannot continue.

On the other side of the balance sheet, as well as the cuts in spending identified by An Bord Snip Nua, it will probably be necessary to revisit the National Development Plan, and in particular big projects like the Dublin metro, which is looking increasingly unrealistic.

In other to make the pain more palatable, the minister for finance should announce a minimum 50% cut in TDs' expenses, a 10% cut in TDs' salaries, the ending of ministerial pensions for those still in receipt of a political salary, the reduction in the number of ministers for state from 20 to 10, a similar reduction in the number of Oireachtas committees and a cap on spending on ministerial cars. The savings from such measures would be small in the overall scheme of things. But they would be very important to show solidarity with ordinary citizens.

And if the government was to act in such a decisive and strong manner, it would send out a powerful signal of intent, both internationally and domestically, that Ireland Inc was capable of deciding its own destiny. The government shouldn't expect to be thanked for it politically but, sadly, we are way, way beyond politics. This is about survival.

scoleman@tribune.ie