The decision of the State's largest trade union, SIPTU, to back entering talks on what would be an unprecedented fifth national pay agreement will certainly be welcomed by the Government and employers who are keen to maintain the security blanket such agreements provide.

However, there are a number of hurdles between now and a final deal, not the least of which is the seemingly interminable crisis in the public sector, where the pay claims of nurses, and to a lesser extent the Garda, threaten to unleash an avalanche of claim and counterclaim from other public sector workers.

There is also the question of how to match the rising expectations of workers with the employers' fear of a sharp decline in competitiveness.

The most immediate threat lies with the critical pay situation in the public sector. The nurses are determined to pursue parity with other comparable professional grades in the health service and argue that the long-sought claim is specific to nurses alone and should not be restricted by the limits of any national pay agreement.

They turned down a recent Labour Court recommendation which, all told, yielded an average increase of 23 per cent of the nurses' pay bill. It was rejected despite an agreement some years ago between the Government and ICTU which capped the overall increases available to public sector workers at 5.5 per cent.

The Government is holding firm so far, telling the nurses it cannot override the Labour Court's independence. It has also been told in no uncertain terms by the other public sector unions that if it concedes anything more to the nurses or the Garda it will be faced with follow-on claims.

Teachers and civil servants argue that they settled for increases of around 6 per cent because they were told by the Government at the time that that was the maximum available. As strong supporters of partnership, these groups took the Government at its word, settled and paid the price. They then watched as the Government yielded to the Garda and the nurses.

Public sector unions which settled early have been patient to date, knowing that an avalanche of knock-on claims would ultimately collapse the partnership process. These same unions are strong supporters of national agreements and, indeed, actively pursued such agreements back in the bad old days of the mid-1980s.

However, while the union leaders themselves are aware of the dangers of throwing out partnership, they are under increasing pressure from members to get the same deal as the nurses. This pressure will grow if the Government concedes further increases to nurses and gardai. Teachers and civil servants will have no choice but to follow.

Inevitably, a free-for-all in the public sector would spread to the private sector, with disastrous results for the traditional partnership model. The trade union movement has always maintained a strong unity between the public and private sector because of mutual dependence and awareness that any split would be damaging.

This, however, disguises the real tensions that often exist between both sides. In the past the private sector unions have looked on in envy while public sector unions secured increases well above the terms of any national pay agreement.

The stakes are high in the nurses' dispute. Irrespective of the merits of the nurses' pay claim, it has the potential to undermine 12 years of partnership pay deals. While no union would say it publicly, in private the unions are hoping the Government holds firm this time, if only to send a message to union members that straying from partnership is not in their long-term interests.

The key to a new agreement is whether the Government will hold firm when, as now seems likely, the nurses take to the streets. The Taoiseach, Bertie Ahern, will need all his legendary negotiating skills to broker a deal. Any agreement must square a difficult circle: addressing the nurses' anger while avoiding any knock-on claims.

If that particular hurdle is crossed, then the Government, unions and employers face another Herculean task. This is the delicate one of agreeing a new pay deal that meets the rising expectations of workers but ensures that the economy maintains its competitiveness.

It will not be easy, as this will be the first pay agreement negotiated against the background of robust economic growth and nearly full employment. Indeed, the national pay agreements of the late 1980s and early 1990s were forged out of adversity, and the resulting moderate wage agreements held firm because there was no alternative. That is not the case today, and the structure of past agreements - moderate wage increases boosted by tax breaks - may not remain intact.

The solution may lie in a flexible deal which gives moderate increases on basic pay while allowing companies to negotiate gain-sharing or profit-sharing deals on top, which would not damage competitiveness.

Employers will be wary of paying too high a price for a deal, given that nobody can be sure what economic shocks are round the corner. Employers will also come under pressure to facilitate worker involvement and participation at employment level, where it counts.

The spate of tribunals and tax scandals has only deepened the "them and us" adversarial approach favoured by those trade unionists who oppose partnership. Significantly, the unions have, thus far, restrained themselves from overplaying this card.

This indicates a strong desire to maintain the partnership approach, which has allowed the trade unions an input into social and economic policy and is the envy of European trade union colleagues. The union leaders, with their experience of the bad times, appreciate the importance of partnership. But it might be difficult to relay this to the younger worker who has only known the good times.

The main hurdle to an agreement, though, remains the nurses' dispute. The Government's hope is that SIPTU's decision yesterday to enter talks on a new deal will herald a critical momentum that will carry all parties over the line by early next year. But prospects for a deal remain on a knife edge.

Martin Frawley is assistant editor of Industrial Relations News