Government still obliged to cut public pay bill by €300 million this year, says troika

The troika has said the Government remains obliged to cut the public pay bill by €300 million this year, an intervention which follows indications that the revised Croke Park II deal will fall short of target by up to €20 million.

Although the Government is understood to have firmly reiterated its commitment to meet the target in its latest contacts with the troika, Minister of State for Finance Brian Hayes suggested at the weekend that the €300 million savings might not be achieved.

Objective
The Government has yet not set out in detail the savings it anticipates from the new arrangement.

However, Minister for Public Expenditure Brendan Howlin said after the talks that his objective is still to secure €300 million this year and €1 billion over three years.

Questions have been raised as to whether the targets can be met because public sector unions stand to receive a number of key concessions from the Government under the new pact.

The latest indications from informed sources suggest that the likely shortfall this year will be in the region of €20 million.

Asked about the revisions, the official spokesman for EU economics commissioner Olli Rehn made it clear that the requirements on the Government were absolute.

The European Commission is one of three members of the troika, the others being the International Monetary Fund and the European Central Bank.

“The statement issued by the troika on 9th May, which recalled that ‘sustaining Ireland’s fiscal performance is key to durable market financing’ and that ‘the strict implementation of budget 2013 measures . . . is essential to meet the Government’s commitment to a 2013 deficit ceiling of 7.5 per cent of GDP’ remains absolutely valid,” Mr Rehn’s spokesman said.

“This includes the €300 million of savings foreseen from the public sector pay and pensions bill.”

The troika’s position reflects the view that the achievement of the €300 million target would send an important signal to bond investors as the Government plots its return to the private debt markets later this year.

A further concern on the troika's part is to maintain confidence in the Irish economy generally and to support the message that the recovery plan is working.

Key changes
Some of the key changes to the deal relate to the health sector, where nursing staff will retain double-time payments for Sunday work but move to a 39-hour week from 37½ hours.

The troika’s latest review of the EU-IMF programme ended earlier this month.

The international inspectors said the programme remains on track but said the strict implementation of budget measures including in the health sector was crucial.