Public service unions and government sources say they are optimistic that some agreement will be reached in the pay talks in the coming days which will prevent an escalation of industrial action across the public service.

Both sides accept that the prospect of a third breakdown in public sector pay talks in a little over a year would catapult both parties into a near perpetual state of conflict which would suit nobody.

"I am confident that if the will is there a deal is possible," Peter McLoone, chairman of the Ictu public sector unions committee said yesterday.

The man chairing the talks, Kieran Mulvey, the head of the Labour Relations Commission, had hoped that the talks would conclude today but they are now expected to stretch into this week.

The high-profile dispute at the passport office and the Cpsu conference, which concluded yesterday, have upset the talks which have been ongoing for the last two weeks.

The actual talks have been taking place at various secret locations around Dublin rather than Government Buildings. This is aimed at preventing information being leaked to the media.

The Cpsu's demand for the restoration of January's pay cuts this year has put the union, which represents 10,000 lower-paid clerical staff, out of kilter with its colleague unions in Ictu.

These unions, such as Impact, Siptu and teacher unions which represent the vast majority of public servants, have taken a more conciliatory approach, talking about the restoration of pay cuts over time.

In reality, these unions are more concerned about avoiding any further cuts in pay and pensions.

The Cpsu backed a motion at its conference threatening to escalate the current work-to-rule to full-scale strike action unless there is agreement at the pay talks.

The Department of Finance is adamant that it needs the unions to sign up to verifiable reforms across the public service. including an 8am to 8pm working day in health.

It also wants an extra hour's work each week for teachers, before it can consider any compensatory pay increase even by next year.

On the issue of pay, Finance warned that it could not do anything that would be perceived by the international banks as reversing its tough budgetary stance to date which would make necessary borrowing harder and more costly. It has told unions Ireland must avoid "a Greece scenario".