The Irish government has rejected a recommendation to return the country to a full lockdown in the first clash with health chiefs since the Covid outbreak began.

The surprise recommendation by the National Public Health Emergency Team (NPHET) late on Sunday to impose the highest of five levels of restrictions possible with immediate effect had led to sharp criticism from some of the country’s most senior politicians, including the former taoiseach Leo Varadkar.

While the rising spread of the virus is causing alarm and has led to partial lockdowns in several counties, most of the country is still on level 2 restrictions, involving fewer limits to social and economic activity.

Ministers faced opposition from politicians and business to what would have amounted to Europe’s first major second-wave national lockdown.

On Monday night, the cabinet opted to move the country to level 3 from midnight on Tuesday. This involves a ban on visits to houses by more than one other household and no more than six people, restrictions to restaurants and pubs, most of which remain open, no outdoor events, no matches or events unless elite sports and weddings restricted to 25 people.

The taoiseach, Micheál Martin, said central to discussions about moving to level 5 was looking at the wider implications for the economy.

“What happens next is in our own hands,” Martin said in a televised address, saying some businesses may not be able to recover from a disproportionate reimposition of more severe restrictions. “It’s about protecting lives and livelihoods.”

Varadkar, who is now the deputy prime minister with responsibility for jobs, went further, telling RTÉ on Monday night that NPHET’s level 5 recommendation “hadn’t been thought through and there hadn’t been prior consultation”.

His was also critical of how NPHET has acted, saying “landing something on a Sunday night … without prior consultation” was not the right way to do things.

The decision will be debated in the Dáil on Tuesday and is expected to prompt clashes with the main opposition party, Sinn Féin, led by Mary Lou McDonald.

Varakdar said a move from level 2 to level 5 would have amounted to an “experiment” not tried elsewhere in Europe and that the body in charge of Ireland’s hospitals disagreed with the health chiefs’ capacity concerns.

The Irish Times said the decision had meant “the relationship between the government and NPHET has been fundamentally reset”.

As the fallout from the breakdown in the relationship with medical chiefs was beginning to hit, the government minister Thomas Byrne said on RTE radio on Tuesday morning that moving to level 5 would have created financial difficulties.

He said Varadkar has been “typically blunt” but he had “absolute confidence” in the chief medical officer, Tony Holohan. One newspaper said that Varadkar has not only run over the CMO but reversed over him.

Developments in ireland will be watched closely all over Europe, where continuing collaboration between government and medical chiefs is central to the response to a second wave of the pandemic.

The decision is a significant departure for the Irish government, which has largely followed public health guidance over the infection, enacting some of the strictest international travel restrictions in the EU.

It may leave the faltering coalition government, inaugurated in June, vulnerable to criticism if the less stringent restrictions do not turn back the pandemic and cases continue to mount.

Under level 5 restrictions, people would have been asked to stay at home, except to exercise within three miles (5km), with only essential retailers allowed to stay open – broadly similar to the initial seven-week lockdown, which was among the longest imposed in Europe.

All indoor restaurant dining is banned under level 3, which has applied in the capital, Dublin, and the north-west county of Donegal for the past two weeks. Pubs can serve a limited number of customers outdoors with the exception of Dublin, where bars that only serve drinks have yet to be allowed to reopen.

Those tighter local restrictions have kept the unemployment rate just below 15%.

While Ireland reported the highest number of daily cases since late April on Saturday and a similar number on Monday, its 14-day cumulative case total of 104 per 100,000 people is only the 14th highest infection rate among 31 European countries monitored by the European Centre for Disease Control.

But a health official who advised a lockdown said that with one of the lowest intensive-care unit (ICU) capacities among the advanced economies of the OECD, Ireland may run out of ICU beds in a month on the current trajectory.