Cyprus was just an hors d'oeuvre. Portugal is readying itself for a convulsive moment when the government attempts to bypass a constitutional court ruling that bans many of its most caustic austerity measures. The situation worsens daily in Greece. And then there is Ireland.

A plan to slash €1bn (£860m) from the public service pay bill over three years has just been rejected by unions, plunging the Fine Gael/Labour government into crisis. The deal was supposed to be sealed by July, but with further negotiations and ballots necessary to get the cuts plan back on track, and with union opposition hardening, the government may be forced to carry out a threatened 7% across-the-board cut in pay.

The €1bn in savings is part of the Irish government's deal with Brussels and the IMF and must be implemented if the government is to comply with rules that govern how much it receives in bailout funds.

It was always going to be tough to persuade public sector workers to accept a pay cut when much of Irish society remains unreconstructed from the corrupt boom years and the bankers, property developers and professionals who benefited handsomely before 2008 appear to have gone unpunished.

For many public service workers the 7% cut is just the latest attack on their living standards. For some, it will add up to a 25% fall in incomes since 2008.

The so-called Croke Park II deal that broke down on Tuesday is more nuanced, but includes pay cuts for all as a central measure.

Deputy prime minister Eamon Gilmore is hopeful of a resolution, but it won't be easy persuading Labour MPs to back an imposed pay cut that will inevitably lead to a confrontation with workers across the public sector.

The Irish Times said the minister for public expenditure, Brendan Howlin, can only avoid the 7% cut if he can find a way of tweaking the agreement to provide for smaller pay cuts allied to flexibility in working arrangements.

"However, the timescale for any new re-engagement by the government with the unions is very short," it said.

"Any revised deal would have to be put out again to ballot and, to meet the government deadline of July for savings to come on stream. Any new talks would have to be completed by the end of May."

It is possible the Irish government will find a fudge that keeps the IMF and Brussels at bay. But it shows the tensions that remain inside the eurozone, which, with its austerity obsession intact, is likely to suffer many more convulsions.