A second one-day strike by 250,000 public sector workers has been called off as Government and unions edged closer to agreeing 1.3 billion euro pay cuts.

Despite the breakthrough, teaching unions were facing internal revolt over proposed wage cuts and wider reform.

Negotiators have been locked in talks for several days with discussions centred on two weeks unpaid leave and radical reform of shift patterns to slash overtime.

Taoiseach Brian Cowen welcomed the suspension of Thursday's strike.

"The Taoiseach welcomes the fact that the industrial action planned for Thursday will not now take place and hopes that progress can be made in the coming days," a Government statement said.

Bernard Harbor, from the Impact trade union, said the basis of a deal to secure the bulk of savings through unpaid leave has been agreed.

"There has been enough progress to suspend the strike," he said.

Talks on the Budget cuts will resume at Government Buildings tomorrow morning.

But angry teachers lashed out at the Irish Congress of Trade Unions' negotiating team claiming they had no mandate to open talks with the Government on pay cuts.

Representatives from the INTO, TUI and Siptu claimed it the greatest betrayal in the history of the Irish trade union movement before branding Congress negotiators "Government agents".