Picking up the pieces

Thu, Apr 18, 2013, 06:02

Rejection of the terms of Croke Park II by a majority of public service workers has placed the Government and the Irish Congress of Trade Unions in invidious positions. On the one hand, savings of €300 million have to be made this year if the budget is to be implemented; on the other, extensive public service unrest would inhibit economic growth and a fall in unemployment levels. The prospect of successfully tweaking the multifaceted Croke Park deal may be slight but efforts should be made in that regard before the July deadline is reached.

Negotiating this “least bad” response to a €12 billion annual deficit was a high-risk exercise for the trade union leaders involved. Their courage in embarking on a deeply unpopular task and their determination to cushion the impact on vulnerable members should be recognised. Ultimately, however, when workers were asked to voluntarily accept a cut in living standards, they declined to do so. That rejection is understandable, in view of earlier impositions. It may also reflect a perception that the financial crisis is over and that lending conditions set by the troika can be ignored. If so, it is a dangerous conceit.

Taoiseach Enda Kenny set the tone for a resumption of contact with trade union officials by insisting the Government had no option but to make the specified savings and was determined to do so. And he emphasised that the Cabinet was “absolutely united” behind Minister for Public Expenditure and Reform Brendan Howlin in resolving the issue. It was an endorsement Labour Party TDs could have done without as they came under pressure from their traditional support base. Whatever about such inter-party tensions, however, the survival of the Government depends on its ability to deliver on savings already provided for in the budget. That will require unpopular decisions.

An across-the-board pay cut of 7 per cent, as suggested by Mr Howlin, would appear to be an excessively crude response. Sectoral agreements are possible. The Government may also revisit the template devised for such a situation by Fianna Fáil when it was in office. When negotiations with public sector unions broke down in 2009, the government imposed pay cuts ranging from 5 to 15 per cent on incomes from €30,000 to those over €200,000. Those cuts generated savings of €1 billion a year, three times the amount required now.

Government overconfidence may have contributed to present difficulties. Its determined optimism and achievements on the banking and fiscal fronts as it promoted foreign investment and prepared for a return to the financial markets projected an excessively rosy picture. Troika discussions, following rejection of the deal, have not resolved any uncertainty in that regard. Difficult negotiations lie ahead.