Donohoe stops short of ruling out increased Government pay offer

Minister for Public Expenditure Paschal Donohoe has stopped short of ruling out an increased Government pay offer to public servants, while insisting the current €2.9 billion proposal is ahead of the rate of inflation forecast for the Irish economy and represents a “fair” deal.

Mr Donohoe said the Government’s offer, which would see public sector workers get pay increases of 8.5 per cent over 2½ years, was “ahead of what many in the private sector will be seeing”.

“I do want an agreement but I want an agreement that is affordable,” Mr Donohoe said on the sidelines of the World Economic Forum in Davos.

The Government’s offer is less than the 12.5 per cent sought by unions, but both sides have indicated their willingness to engage with the Workplace Relations Commission (WRC) process.

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Pressed if the Government would go above the €2.9 billion offer, Mr Donohoe said he had to be careful about making “absolute statements”. This would be inconsistent with engaging with the WRC process. “If you’re going to go back into the WRC it has to be on the basis of trying to find an agreement.”

The negotiations will affect some 385,000 public servants as well as pensioners who will also receive any pay increases agreed.

Mr Donohoe, who is also Eurogroup president, was in Davos to contribute to a panel discussion on capital markets and to meet various business leaders. He confirmed he met UBS chair Colm Kelleher, vice-chair of Bank of America Paul Donofrio and chief executive of Goldman Sachs international Richard Gnodde.

Asked again if he was in the running to become the next head of the International Monetary Fund (IMF), a role for which he is said to be in the running, he said he hoped to return to Davos in 2025 as Minister for Public Expenditure and head of the Eurogroup.

On the recent rise in inflation, [it rose to 4.6 per cent in December, up from 3.9 per cent in the previous month], Mr Donohoe said he had always expected the last phase of getting inflation down to be the hardest. “The next part of the journey in getting inflation down is going to be tough but it’s a journey that we need to complete because if we don’t we run the risk of inflation becoming embedded within our economies, and that in turn will make Ireland and Europe poorer for longer.”

European Central Bank officials who until recently had been wary of even discussing interest rate cuts now look increasingly open to commencing them in June. Speaking this week in Davos, ECB chief Christine Lagarde and several of her colleagues dismissed investor bets on reductions before then. But they signalled the chance of a move around mid-year, when they will know more about inflation, wages and the stuttering economy, as well as the harm to supply chains by Yemen’s Houthi rebels.

Quizzed at Bloomberg House on a summer rate cut, Ms Lagarde described the prospect as “likely”. – Additional reporting: Bloomberg

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