Blunt words were spoken on all sides last week as the parties laid out their negotiating positions in preliminary salvoes in Dublin Castle and the government emphasized that tax cuts weren’t on offer to help sweeten a deal this time round.
The employers are calling for a wage freeze for six months but the unions say that is not on — people would not tolerate a drop in their living standards and want their wages to be at least protected from erosion by inflation.
The minister said that over the last five years, while employee earnings rose by about 13 percent across the Euro area and by about 16 percent among the EU-15, employee earnings rose by about 42 percent in Ireland.
“The boom is over,” McCreevy said. “Economic growth this year has slowed markedly. The latest consensus forecasts are moving toward 2.5 percent and 3 percent gross and national product rates, respectively, this year — and even that may be overoptimistic.
“The outlook for 2003 is not much different and the average growth rate for the period 2003 to 2005 is likely to be in or around 3 percent and 4 percent in terms of GNP and GDP.”
Taoiseach Bertie Ahern said that a new consensus on pay was in the country’s best interests, but he also warned the meeting that expectations would have to be curtailed.
“The reality is that general economic conditions are tighter now than they have been at any point in the last five years,” Ahern said. “The competitiveness agenda has become much more demanding, as recent job losses have underlined. The inevitable impact on the public finances has become sharply evident over recent months and weeks.
“Therefore, it is vitally important that realism guides us all. While nobody wishes to go back to the bad old days, we do have to moderate our expectations so that we are in a healthy position to take advantage of the upturn in the world economy when, eventually, it comes.”
Multi-year social partnership deals have been a key component of economic planning for 15 years and have underpinned the Celtic Tiger boom. Previous agreements have involved a mix of wages increases, tax cuts and social welfare benefits in the annual budget and industrial peace provisions to minimize labor disputes and strikes.
The strategy was that workers’ net take-home pay would rise significantly but employers would not have to bear the full cost.
The outgoing agreement, the Program for Prosperity and Fairness, gave workers pay raises of about 20 percent over the last three years.
McCreevy said tax income is now below target and the problem has been added to considerably by high rates of growth in public spending.