Public sector workers should brace themselves for pay cuts imposed by the International Monetary Fund (IMF), according to Ryanair Chief Executive Michael O'Leary.

He warned that the ongoing failure of Taoiseach Brian Cowen and the Government to tackle the spiralling cost of the public service wage bill could see the IMF take charge of the Irish economy "very shortly". Asked if he had any confidence that the forthcoming Budget would address the 25 per cent differential between wages in the public and private sectors identified in a report published by the ESRI last week, Mr O'Leary made it clear that he did not.

"It's all talk about action, but no action. The McCarthy report is now nearly three months old, and what have they done about it? Nothing," he said. "I think public sector workers will want to seriously be concerned that the IMF might come in here very shortly like they went into Latvia and cut public sector wages by 30 per cent. These are the hard measures that are going to have to be taken when you have a €20bn deficit with €60bn spending and less than €40bn in tax revenues."

Repeating his call for a Yes vote in this Friday's Lisbon referendum, the Ryanair chief appealed to Government politicians to "shut up and stay out of it" -- claiming they have "absolutely zero credibility" with the public at present.

"I think if we vote No, this will be the end of it. Europe has already bent over backwards to give us back our commissioner and put legal protections there on taxation. I don't think they'll do it [let us vote] again," he said.

Mr O'Leary warned that Ryanair could decide to pull its headquarters out of Ireland if the country votes No. "If Ireland votes No, I can see a time in the future when it is sensible and practical for Ryanair to move its headquarters out of Ireland and put them somewhere you would have a lot of political support, and be at the heart of Europe.

"Whether we vote Yes or No will have no effect on Ryanair but it will have an enormous effect on Irish jobs; for good if we vote Yes and for bad if we vote No. I doubt there would be any immediate implications, but I think over the next two to three years, the cost of Irish Government borrowing would rise and Europe would not be as helpful to the Irish economy as it has been in the past; and I think the amount of inward investment into Ireland would seriously dry up."

Mr O'Leary predicted that there will be 500,000 people unemployed in Ireland by the end of this year.

"The fastest way of getting some of those people back to work is to vote Yes and encourage Europe to continue to bail out our economy. Woe betide us if it's left to our bloody politicians and our even more incompetent civil servants".