ANALYSIS:Crucial to our boom time, the partnership mechanism is needed now more than ever, writes Arthur Beesley
A STEADY succession of social partnership pay deals was achieved with relative ease in the boom years. Now that the economic tide has turned with a vengeance, the system is showing marked signs of wear and tear.
Whether it breaks down definitively this weekend remains to be seen. But with little prospect of agreement in sight late yesterday, any suspension of the current talks would mean that the system has failed its biggest test since the torrid days of the late 1980s.
The irony here is that social partnership - a mechanism to foster industrial peace and set fiscal parameters for the Government, business and workers - was a crucial pillar of Ireland's economic recovery and the extraordinary boom that followed it. As the threat of recession looms ever larger, it seems now that a crucial lever for tackling the complex challenges that lie ahead has come badly unstuck.
While conditions worsen by the week and forecasts point to a worsening of the pain in the months ahead, fixing it will not be easy.
Yet this is in the best long-term interest of all participants, notwithstanding the immediate pressures on each side. In uncertain times, a new partnership deal would offer a level of certainty over the cost of running businesses and the State itself, and a lower risk of strikes and other industrial disruption.
For those charged with attracting foreign direct investment into the State to create jobs, it would show companies from abroad that there can be some control over costs in an economy more exposed to the vicissitudes of the international markets.
If no agreement is reached, all of that simply fades away. This is bad news indeed for Taoiseach Brian Cowen, whose predecessor Bertie Ahern was master of the partnership process and never failed to bring home the deal.
But Ahern, the great conciliator, led in happier economic times. If prosperity meant there was something for everyone from social partnership in Ahern's time and an atmosphere of co-operation, Cowen's arrival at the helm of Government has coincided with an increasingly ideological slant to the argument from employers and unions. Hence shrill demands for a cut in the minimum wage from the Small Firms Association. These seem every bit as unreasonable as arguments from some trade unionists that seem to cast pay in the private sector at large in the cloak of the handsome remuneration seen at top management.
Cowen is already in the thick of an exchequer crunch that has eroded tax revenue while expenditure increases to meet the cost of rising unemployment, so the last thing he needs now is an increased threat of industrial disruption.
Yet that will be in store if no agreement is reached and employers and unions return to local bargaining. With this in mind, it must be the Taoiseach's calculation that no deal is possible at present if he does not intervene to bring reluctant partners together in their mutual interest.
The biggest issue here is pay and a painful inflation rate that cuts into the standard of living, hurting most those with the least. This has led to demands for a 5 per cent rise from unions, which has been met with employer pleadings of ruinous consequences.
There are severe pressures indeed on both sides.
Mortgage rates have risen, just as motor fuel, home heating oil, gas and electricity tariffs rise to levels that make it difficult for many families to make ends meet. As house valuations plummet, consumer confidence is on the floor.
All of this serves to increase pressure on business, as dollar and sterling weakness erode revenues from abroad, and higher energy and finance costs eat into the bottom line.
Thus liquidations and receiverships are on the increase, leading inexorably to redundancies and higher unemployment.
As Cowen and his Ministers attempt to balance the books in these most difficult of circumstances, this cocktail of external and internal forces is greatly increasing pressure on the public finances.
Hence the recent round of spending cutbacks and glaring threat of more to come.
If social partnership was designed to grease the cogs of the economy, the defining hour is rapidly approaching.