Official figures showing more than 25,000 notified redundancies last year, a rise of almost 30 per cent on the previous year, are the latest indicator of a deteriorating economic picture. The total number of redundancies last year was twice the level of 2000 - the final year of the economic boom - and publication of the figures coincides with rising unemployment and slowing economic growth. The latest data should come as a warning, if one is needed, that competitiveness is now seriously under threat. Any wage deals reached either inside or outside a new national agreement need to take this into account.
A number of factors have combined to hurt the competitive position of the Irish economy. Inflation - and wage growth - has been running well ahead of that of our trading partners. Meanwhile the rise of the euro in recent weeks has damaged the competitiveness of companies which export outside the euro zone. If this trend continues, then the Irish economy will not be in a position to benefit fully when the international economy starts to grow again. We will, quite simply, be pricing ourselves out of many markets.
The indications last night were that there may be one last effort to reach a new national agreement to replace the Programme for Prosperity and Fairness. Unfortunately, the negotiators face enormous difficulties in breaking the inflationary psychology now becoming ingrained in our economy. The ill-judged Budget day excise increases will push the inflation rate to around 6 per cent this month and this figure appears to be a base for the demands being prepared by unions if the national talks fail.
Meanwhile, highly inflationary benchmarking pay recommendations for the public sector are central to the current negotiations. The rationale for these recommended increases has never been properly explained. Nor is it clear how it can be ensured that any benchmarking rises are reflected in better services. A clear strategy to improve public services and tackle the infrastructure deficit needs to be central to any new national agreement.
Negotiators on all sides need to stand back and consider the competitive threat facing the economy. If a middle road is to be found between employers and unions, then it must be one that is in the interests of the wider economy.
If the outcome of the talks is to embed an inflation rate of 5 per cent-plus into the economy over the coming years, then the price will be paid in rising unemployment.