Politicians, business and trade union leaders have begun a complicated negotiating dance about a new social partnership deal that will last for months, writes Mark Hennessy, Political Reporter
Ostensibly, the Government and social partners gathered in Dublin Castle yesterday to review progress on the Programme for Prosperity and Fairness. In reality, however, the PPF is already eaten bread.
The business has already moved on to whether there can be a successor in talks beginning in the autumn, or whether industrial relations will be forced to survive without a national deal for the first time since 1987.
Flanked by the Minister for Finance, Mr McCreevy and the Tánaiste, Ms Harney, the Taoiseach had come equipped with key messages, particularly the need for curbs on public spending.
The chaos on the international financial markets was strongly emphasised. Stock market falls have hurt the US economy. If it falters, the Government's economic predictions may not be realised, they chorused.
Urging caution, Mr Ahern said: "A strong dose of realism will be called for on all sides, Government, employers, trade unions, the farming sector and the community and voluntary sector."
However, the Government will find it difficult to manage expectations. In truth, the Government's recent Budget trimming will only barely make up for the decision to speed up the delivery of electoral goodies for key voters before the general election.
Now the Tánaiste warns that "spending was out of control for the first six months", while the Minister for Finance behaves as if strong pressure on the public finances only came out in May and took him by surprise.
Mr McCreevy told the audience: "Most of you will be aware of my philosophy in relation to public spending. We cannot spend what we don't have."
The Budget changes already made, or on their way, will ensure that Government spending does not rise by more than the 14 per cent predicted on Budget day, though clearly the ERSI is not so sure.
Anxious to dispel talk of cuts, he went on: "The fact of the matter is that this Government will still allocate more resources to the development of our public services than any other government in the history of the State."
Irish competitiveness has already been weakened by wage rises. Now it appears set to lose at least some of the benefits it enjoyed from the weakness of the euro against sterling, a weakness that now seems to be changing.
"The increasing strength of the euro will increase the costs of our goods abroad," he said.
Despite the national and international economic downturn, expectations in Ireland are, however, still high, as can be witnessed by the €1 billion benchmarking bill still waiting to be paid.
Predictably, all sides disagreed about the size of wage increases paid to Irish workers over recent years. Both the Government and employers argued that the rises are unsustainable.
But the ICTU leader, Mr David Beggs, argued that workers are living in the most expensive economy in Europe with the 14th best wage package "measured by pay per hour".
The next social partnership deal, if agreed, would have to deal with social inequality in Ireland: "We are too much like the United States. The argument about Boston and Berlin is very relevant."
Workers, he said, "are not just simply fodder that can be rolled in and out by government and employers to suit their agendas. Many ordinary people are finding it enormously difficult to make ends meet".
Employers, he said, had received the major share of the gains over recent years, particularly from non-PAYE tax changes. Wide-ranging tax reform will be part of the ICTU price for a new agreement, he declared. The message of social inequality was preached too by Father Sean Healy of the Conference of Religious in Ireland: "This moment coincides with a slowdown in growth rates and budget cutbacks aimed at balancing the books at a national level.
"All is not well in Irish society. All are not enjoying the benefits that should have emerged from the spectacular economic growth of recent years," he said.
The UN Human Development Report published earlier this week showed that Ireland has the highest level of poverty in the Western world outside the US.
"This is true even though Ireland is one of the richest countries in the world in terms of income per capita [even when counted on a GNP rather than a GDP basis].
"Despite the major growth of the Irish economy in recent years, many people are left further behind and Ireland has become a more deeply divided, two-tier society," he said.
The Taoiseach, Mr Ahern, said: "The cost of benchmarking is €1.1 billion. Implementing it this year or next would be a great idea if there was a spare billion around. In fact, we are overspending by about a billion.
"It isn't just realistic. In any discussion you have to be realistic. But we are committed to it, but it has to be structured in a way that we can afford. You cannot put it all into public service pay and then make pensioners and the less well-off suffer." The early signs of a possible compromise may perhaps be already visible, to judge by comments from IMPACT general secretary Mr Peter McLoone.
The support of IMPACT for social partnership could not be taken for granted. Such support would unravel if the promise to pay benchmarking within the agreed timetables were to be broken, he said. However: "If the balance of benchmarking was paid towards the end of 2003 then it is a budgetary matter for 2004."