A Fine Gael TD has said the Croke Park Agreement is still affordable, despite the Central Bank significantly cutting its growth forecasts for this year.
The bank said last week that the economy will grow by just 0.5% in 2012 and not the 1.8% that had been previously predicted.
The downgrade raises questions as to whether the Government can afford to sustain the Croke Park Agreement, which promised that public sector wages will not be cut any further and that increments will be maintained.
However, Dublin TD Paschal Donohue has said he feels the Government can still afford to keep this deal in place.
Mr Donohue said: "Is it still affordable? The short answer to that question is yes.
"The reason for that is that all the assumptions in Croke Park are included in the budgetary framework for the year. I think the more relevant question is 'Will it work?'.
"We are going to be facing into the period when that is going to be strongly tested as we have a large number of people leaving the public service on the retirement plan at the end of the month. My strong judgement is that it will work."