Talks on a successor to Partnership 2000 enter their "make or break" phase this week. There is considerable pessimism among senior trade union and business leaders that a deal can be made which each side can sell to its members.
The first indications of whether agreement is on the cards could come on Wednesday, when the council of the Irish Business and Employers' Confederation meets to hear a report from its negotiators on progress to date.
So far neither the Irish Congress of Trade Union negotiators, nor those from IBEC, have put hard figures on the table. IBEC is maintaining its stance that increases must be in line with those of EU competitors, which would mean cumulative increases worth about 10 per cent over the next three years. The ICTU has indicated that anything less than 20 per cent over the same period will not run.
In an effort to bridge the gap, the Government has indicated that significant tax concessions are available. It is also ready to publish legislation on the national minimum wage. The rate set will depend on the outcome of the talks on a successor to Partnership 2000.
If the talks are successful, the rate is expected to come in closer to the trade union demands for £5 an hour. So far the Government has not moved from the original figure of £4.40p, based on 1997 prices.
While national pay talks traditionally run over schedule, the current negotiations will probably conclude, one way or the other, by the January 31st deadline. The State's largest union, SIPTU, is preparing claims for a "free for all" situation.
The current agreement runs out for SIPTU on March 31st. The union has already concluded agreements in low-pay sectors such as contract cleaning and security which will push basic pay rates up to £5 an hour, or close to it. Low pay remains a central issue in the talks, although it is unclear yet how it will be tackled.
The likelihood is that there will be minimum flat rate increases factored into national pay rounds. The Tanaiste, Ms Harney, renewed the Government's commitment to taking people on the national minimum wage out of the tax net when she was interviewed on RTE's This Week programme yesterday.
It is also understood that the threshold at which employees' PRSI is introduced may be raised. This would be worth up to 4.5 per cent for some workers.
Public service pay is another key issue. It now looks as if the problem of the "early settlers" such as teachers and civil servants can be addressed within the parameters of the current talks - although there is still a danger that any increases over 5 per cent could provoke new catch-up claims from "late settlers" such as nurses and gardai. It also looks as if the introduction of performance-related reward structures can be overcome.
However, the withdrawal of the Association of Secondary Teachers of Ireland from the ICTU shows how sensitive both issues remain. But on its own the ASTI cannot derail the talks, even if it embarks on the same militant route as the nurses.
More crucial will be the pay increases on offer, including the degree of flexibility provided for local bargaining in both the private and public sectors. The success of the economy has made both employers and unions more confident of their ability to survive in a free-for-all. While such a scenario would not suit weaker sectors of indigenous industry or the socially marginalised, it is by no means an unlikely scenario at this stage.