Debt and public sector deals needed - and loads of jobs
Fine Gael TD Paschal Donohoe drew attention to Kirchner’s embarrassment and to the fact that Argentina is still having to pay exorbitant interest on any new borrowings. It is currently paying 9.25 per cent interest on its six-year debt and 14.25 per cent on its 25-year debt.
By contrast, the interest rate on five-year Irish bonds dropped below 3 per cent on Thursday. A good outcome on the promissory notes is crucial to keeping that interest rate down and forcing it even lower in the years ahead. The bond markets are already assuming that it will happen and their response to whatever emerges will indicate whether it is a good deal or not.
A deal to reduce the burden of public sector pay is equally important and Minister for Public Expenditure and Reform Brendan Howlin kicked off talks with the trade unions designed to get agreement on savings of €1 billion over the next three years.
That figure has already been included in the budget arithmetic so the real question is whether the savings can be achieved by agreement or whether it will involve a messy confrontation with the unions with a consequent impact on public services.
The troika supervising the bailout has pointedly referred on a number of occasions to the high pay levels in the Irish public service, particularly in the health sector. However, it has also acknowledged the benefits of industrial peace during a time of such economic crisis. The Government is anxious to preserve that industrial peace but simply has to find more savings.
Both sides appear to be taking the talks very seriously, despite a natural tendency to adopt hard-line negotiating positions at the start. They don’t have a lot of time to get to the point, as the longer the initial €300 million savings for this year are delayed the deeper the cuts will have to be.
An acceptable outcome to the negotiations on the promissory notes and public sector pay would be a huge relief to the Coalition and would allow both parties to breathe a little easier before they sit down in the autumn to draft next year’s budget.
On Thursday, they discussed the issue which both Enda Kenny and Eamon Gilmore have repeatedly said is the biggest of all: unemployment. They are pledged to create 100,000 jobs over the lifetime of the Government but so far progress has been slow.
An updated action plan for jobs will be published next month. Like last year’s initial offering, it will detail hundreds of small actions rather than any dramatic solution. Creating the conditions in which employment can grow requires myriad actions, from improved access to credit for small business to reform of the welfare system. Initial steps have been taken in many areas but the painfully slow pace of change threatens to undermine the effort.