As the results of the local and European elections fade into political memory, the shape of our future politics, and of the challenges facing the government, become apparent once again.

There is no getting away from the realities of our financial situation.

This is the politics of post-boom Ireland. The election results have altered the big questions little enough. They have made clear the political price that Fianna Fáil is paying, and will pay, for its management of both the boom and the bust; they have diminished the government’s authority, but paradoxically increased its cohesion.

The Greens and Fianna Fáil, having had a preview of what hanging separately will look like at the polls, have decided to hang together. But that determination will be severely tested in the months ahead.

Several senior figures in government circles privately confess to having no idea whether the administration has the ability to force through the programme of massive spending cuts that are to come. According to a number of senior sources last week, if there is a plan to manage this process, then very few people are aware of it.

Though the government is, as one senior aide concedes, struggling to the summer recess on July 9, it will face a tougher second half of the year than the first half. This is because the two great issues, fixing the public finances and dealing with the consequences of the recession, will demand immediate action in the months ahead. One problem feeds into the other.

The two big effects of the recession are increasing unemployment - which means increasing social welfare costs - and reducing taxation revenues. As the International Monetary Fund (IMF) report on the Irish economy published last week made clear, we are on our way to having half a million people unemployed. Worse still, there is little prospect of many new replacement jobs being created in the short term for those who are made redundant.

It is unclear how having hundreds and hundreds of thousands of unemployed people walking around - many of them frustrated, angry and despondent - will affect the social and political landscape of this country. But it surely won’t leave it unchanged.

The increased social welfare bill and reduced taxation increase the pressure on an already desperate exchequer situation. A deficit (the difference between what the state spends and what it collects in taxes) in excess of €20 billion this year clearly requires emergency action, as international lenders will not allow Ireland to borrow indefinitely.

That means taxes must go up, and spending must come down. That simple proposition is what will define the government’s economic policy-making and convulse its politics.

The Minister for Finance, Brian Lenihan, has repeatedly indicated that the tax-raising part of the solution has almost been exhausted; in fact, in his two budgets, he has presided over tax increases of a magnitude and swiftness never before seen. And, barring the introduction of property taxes, local charges and perhaps third-level fees, the major changes in the immediate future will be the cutting of public spending.

Last week, ministers were patting themselves on the back for the positive things that the IMF report said about the government’s economic plans. The report was blunt. ‘‘The evidence is clear,” it said, ‘‘fiscal adjustment should focus on expenditure cuts.”

But talking about cutting public spending is much easier than doing it. The IMF was clear on this, too - cuts in the public sector paybill, and in social welfare, will be required.

Either will cause a political storm and lead to marches, strikes and the usual howling outrage on Liveline.

The government will be accused of bailing out bankers while taking money off the poorest. Pleas that the economy must have functioning banks, and that Ireland’s welfare payments and public sector wages are higher than most other European countries, will be hard to hear in the racket.

Preparation for the budgetary process is under way. In more normal times, the Department of Finance produces a budget strategy memo at this time of year which is circulated to ministers, usually in early July. It gives a global figure of estimated income and expenditure for next year, and ministers will then proceed to attempt - in a process which lasts for several months - to secure the greatest share of this for their departments.

This time, however, it’s very different. According to finance sources, the budget strategy memo will be produced in mid-July, indicating greatly reduced government spending next year. The budget strategy memo used to be called ‘the end of the world memo’ in government circles, as ministers poked fun at the Department of Finance’s pessimistic economic projections. That doesn’t seem so funny any more.

More significantly, the coming weeks will also see two important reports being presented to Taoiseach Brian Cowen and his government - the report of the Commission on Taxation and the report of the so-called ‘Bord Snip Nua’, the body chaired by economist Colm McCarthy charged with identifying possible cuts in public spending

The information and recommendations contained in these two reports will enable the government to identify exactly how it can raise taxes and cut spending to control the public finances. The proposed ‘menu’ of cuts identified by McCarthy’s group is already causing division at cabinet level, as ministers digest the political implications of the package.

That process will continue through the autumn, taking a brief break for the Lisbon Treaty referendum campaign in early October.

Ministers are unlikely to make their intentions for major cuts in spending clear before then. Last week, one senior source suggested that the report of McCarthy’s group may not, as had been expected, be published. Why start a war with the public sector unions before you have to?

Last week in the Dáil gave a flavour of how the cutbacks debate is likely to play out, with a Fine Gael motion about the cuts in Crumlin Children’s Hospital. Speaker after speaker decried the government’s cruelty in targeting sick children. In fact, neither Fine Gael nor Labour disputes the policy priorities, only in some cases the means to achieve them.

Privately, the opposition knows that in government it would have to cut spending back, just like the current lot are doing. But opposition parties - quite sensibly - don’t go around promising to inflict pain on the electorate, no matter how inevitable it may be.

When health minister Mary Harney wondered why it was always the most sensitive areas of services that were cut - everyone in politics and health knows this, it’s one of the basic ways of fighting for funding - the Fine Gael leader and presumptive taoiseach Enda Kenny jumped all over her for her ‘‘outrageous’’ (he used the word four times) attack on doctors and nurses.

The reason why services are cut and wards are closed when health budgets are squeezed is that other parts of the budget are impossible to touch. By far the biggest chunk of that budget - some 70 per cent - goes on pay.

In recent years, nurses have had their hours reduced while their pay increased; and consultant doctors were recently awarded a pay rise under their new contract arrangements, a basic salary of over €220,000 a year.

We have the best paid consultants in Europe (probably the world) and the best paid nurses in Europe - and twice as many of them per head of population as the OECD average. That’s because of strong lobbying and weak government in the past.

In the next few months, we will see whether this battered government actually can still govern. Because the coming budget process will leave it nowhere to hide.