A NEW layer of uncertainty has been added to the complex weave of influences which have brought the economy to a startling halt. And while many of the factors already involved - the credit crunch in financial markets, high oil prices and currency fluctuations - are internationally based and largely beyond our control, the collapse of talks between the social partners on a new national pay deal is home grown.
Social partnership is one of the pillars on which Ireland's economic boom was constructed. It is not perfect and has been rightly criticised for its hold over key policy decisions and its "one size fits all" approach. But it has been hugely beneficial in providing certainty to employers in respect of wage costs, ending the bad days of industrial strife, helping to nullify extremes across the industrial relations environment and, in a broader sense, delivering social progress for all. Accordingly it is worrying that these advantages could be lost at a time when the analysis of leading institutional forecasters is that we are on the edge of recession with the risks stacked heavily on the downside.
That consensus should be elusive in such circumstances is not surprising. The pressure on parties to the pay talks was greater and their capacity to compromise more limited than ever. Workers have seen past gains negated by inflation, employers are facing rising costs, and deteriorating public finances - a core element of the same equation - have restrained the Government's scope to bridge the gaps. It is a poisonous cocktail.
The reality, however, is that compromise was never more important - whether it relates to a national pay accord or a return to local pay bargaining which now appears imminent. Just last week the Central Bank revised downwards its projections for economic growth and revised upwards its forecasts for inflation this year and next. Numbers on the Live Register were close to 240,000 in July, the highest total in a decade and construction activity has collapsed. This negativity will be compounded by the kind of industrial instability that will accompany local pay negotiations.
For the Government, failure to broker agreement on a new pay deal adds to the growing list of challenges linked to a shrinking public purse. And in political terms, it will not be lost on Taoiseach Brian Cowen that his latest discomfort relates to an area in which his predecessor first built his reputation as the consummate conciliator.
With domestic spending set to fall this year and a recovery unlikely in 2009, the resurgence of the Irish economy is dependent on a revival of the global economy. From a domestic perspective, we must position ourselves to capitalise on that revival whenever it comes. That positioning would be enhanced by a national pay deal provided it improved competitiveness through wage moderation - taking account of the global economic downturn and the pressures on the public purse - while delivering most benefit to the lowest paid. The gaps between the social partners on pay are great but it is not too late for compromise.