Unrealistic expectations by both employers and workers have the capacity to derail a new national agreement and to cause lasting damage to the economy. There was tough talking and position-taking at Dublin Castle yesterday as the social partners engaged in preliminary skirmishing.
To walk away from social partnership at this stage, however, would be a great mistake. The inescapable message of the past 15 years is that social partnership works. It has conferred benefits on all sections of society in terms of higher living standards, increased profits and growing employment levels. It has not been perfect. And some sections of society have benefited more than others. But national agreements have provided a framework of stability within which investment decisions and social planning could be undertaken and their contribution to Ireland's spectacular economic progress should not be undervalued.
All are agreed that the formulae of past agreements will have to be modified to meet changed circumstances. The extensive Government tax cuts that sweetened moderate pay increases in the last two agreements are no longer an option. But, with the economy still growing annually at about four per cent, it is unrealistic for IBEC to suggest a pay pause, especially as its members will continue to benefit from falling corporation tax rates.
The Minister for Finance, Mr McCreevy, has spoken in blunt terms of the boom being over. And he is clearly anxious to negotiate a gradual phasing-in of pay awards under the benchmarking process, in order to reduce increases in day-to-day Government spending to less than nine per cent in 2003. For its part, the Irish Congress of Trade Unions has said that any pay offer that falls short of inflation rates would be unsaleable to its members.
Continuing economic uncertainty abroad, and a growing number of redundancies at home, forms a threatening backdrop to these discussions. The United States economy remains under severe pressure, while the major European growth centres are performing indifferently. As one of the most exposed trading countries in the world, Ireland has a difficult balancing task to perform. It must remain competitive so that advantage can be taken of any upturn in the global economy. This will require discipline and innovation. Our economy is still relatively robust. Admittedly, there are danger signals, in terms of excessive Government spending and inflation running at 4.6 per cent. But these problems can be managed and a tough December Budget is anticipated.
The National Economic and Social Council, made up of representatives of the Government and the social partners, has been working to produce a template for these negotiations, covering economic and social issues.
That document is likely to be published within two weeks and is expected to recommend a tight focus on pay elements and social issues. Already, the employers' body IBEC and the ICTU on behalf of the workers have set out their stalls. The fact that clear conflict exists between their positions should not surprise. A deal of tough talking lies ahead and concessions will have to be made by all.