A possible 18-month social partnership deal was last night being negotiated between unions and employers at Government Buildings.
Progress was understood to be extremely slow, however, and a breakthrough on the key issue of pay was proving difficult to achieve.
The talks, chaired by the secretary general of the Department of the Taoiseach, Mr Dermot McCarthy, began at 4 p.m. following a round of informal contacts between all sides. After a late evening meal break, they resumed shortly after 10 p.m..
As negotiations continued late into the night, the focus shifted from a possible 12-month deal to one likely to be 18 months.
Some minor progress was also understood to have been made on non-pay areas of importance to both sides, including union recognition, redundancy and how unions can be made comply with the terms of any new deal.
Pay was continuing to prove the major stumbling block, however, with unions holding out for increases of at least 5 per cent, roughly equivalent to inflation. Employers insist that the "wage-price spiral" can only be broken by a six-month pay pause, followed by increases below the rate of inflation.
Uncertainty over the economic outlook beyond next year had led to the expectation that a one-year deal, if any, was the most likely outcome to the talks.
Previous social partnership agreements, including the current Programme for Prosperity and Fairness (PPF), ran for three years. Employers are wary of signing up toa further three years of specific pay rises, especially in light of the "top-up" payments secured by the unions two years ago to counter inflation. It is understood a 12-month model, however, was proving particularly difficult to negotiate.
An 18-month agreement would have the advantage of providing both sides with a little more certainty about future conditions, but without binding employers into another PPF-style deal.
Despite the two sides' willingness to engage, however, the prospect of an agreement remains in the balance.
The general secretary of the Irish Congress of Trade Unions, Senator Joe O'Toole, has said the situation will be irretrievable if a pay deal is not agreed by tomorrow. He was criticised yesterday by the director general of the employers' body, IBEC, Mr Turlough O'Sullivan, who accused him of negotiating through the media.
As he entered the talks yesterday afternoon, Mr O'Sullivan said he was pessimistic about the prospect of a deal.
Sen O'Toole had said unions in the private sector would have to begin lodging pay claims at local level after tomorrow as the PPF expires for many on December 31st.
Some of those claims would be in highly profitable sectors, such as finance and pharmaceuticals, and would set a headline for pay demands in other areas.
Once this process began, he argued, a national agreement would become impossible.
Other union sources said yesterday that they agreed with the analysis by Sen O'Toole but that the deadline for a deal was not necessarily as specific as he had suggested it is.