Public sector pay deal offers ‘fair’ wage growth, Donohoe says

Increased spending on infrastructure a top priority, says Minister for Finance

The new Minister for Finance and Public Expenditure and Reform, Paschal Donohoe, said he stood by proposals for an extension of the Lansdowne Road agreement to increase the pay of public servants by 6-7 per cent between 2018 and 2020.

Speaking to The Irish Times at his first euro-group and Ecofin meetings in Luxembourg, Mr Donohoe said: "I believe that magnitude of wage growth offers the best way of being fair to our public servants, but also navigating all the competing demands."

He said his top priorities in office must be "infrastructure to create the social inclusion we need" and "making sure we have the right sources of investment to allow our country to deal with the particular uncertainty that Brexit will bring".

The Minister spent much of Friday in talks at the European Investment Bank, which has lent €4 billion to Ireland over the past five years and is the largest single lender for infrastructure in the State.


“We discussed how we could strengthen that institution to deal with the consequences of Brexit,” he said. The UK holds 16.1 per cent of the EIB’s share capital, which will no longer be available after Brexit.

Mr Donohoe said he did not think Ireland would be hurt by the withdrawal of British capital from the EIB. Experts from the EIB will visit Ireland in a fortnight to discuss further investment in infrastructure here.


Andrew McDowell, the Irish vice-president of the EIB, said Ireland, with its “particular vulnerabilities,” was the only country specifically mentioned in yesterday’s meeting.

“We have certainly indicated to Ireland that we are preparing to fund a lot more infrastructure and support for enterprises,” Mr McDowell said.

Mr Donohoe said he told his European Union counterparts that the union "cannot be defined by the exit of any one country, no matter how important or big that country is".

“What is very important now is that we co-create a European and an Irish future that will be influenced by Brexit, but not dominated by Brexit,” he said.

On budget preparations, Mr Donohoe said: “The objective over time is to reduce the cumulative level of tax that our taxpayers pay for public services, but to do so in a way that is affordable and delivers the objectives of sustainable national finances, being able to increase investment in our future and deliver a tax code that’s competitive.”

Addressing the issue of the high level of impaired or non-performing loans held by Irish banks, he said it was "absolutely not my objective as Minister for Finance to be in a situation where people's homes are threatened. We have put in place significant arrangements to invest in new solvency arrangements, in support for people who are worried about their mortgages, to help them to stay in their homes. That was the approach of Michael Noonan and it will be my approach too."

An average of 14 per cent of Irish bank loans are impaired or non-performing, compared to an EU average of 5.4 per cent.

The Minister said discussions in Luxembourg about Greek debt drove home to him “the incredible importance of being out of such a [bailout] programme and having a higher level of control over your own fortunes”.

He said he was returning to Dublin with a sense of the “the incredible importance now of credible sustainability in our national finances”.

Lara Marlowe

Lara Marlowe

Lara Marlowe is an Irish Times contributor