IMF and new government live on different economic planets
Published 17/03/2011 | 05:00
What infuriates Ireland's European partners more than anything else is this country's stubborn refusal to accept that a deal is . . . well a deal. (As one irate Dutch journalist said to this reporter recently: "Do you Irish ever accept any deals you make'').
For Irish politicians, agreements aren't there to be implemented or honoured, they are there to be tinkered with, bargained over, diluted down, amended and ideally discarded when it suits.
On December 3, Ireland posted a letter to IMF headquarters in Washington making the following commitment: "The government will introduce legislation to reform the minimum wage in such a way as to foster job creation notably for categories at higher risk of unemployment''.
To the IMF this was a cast iron guarantee, inserted in an official document akin to a bi-lateral treaty, to lower the minimum wage. To Irish politicians it was nothing more than a fickle promise made by one group of politicians that could be easily remedied by another group of politicians a few weeks later.
Hence the new government have reversed the decision, based on their belief that such an idea simply reduces the incomes of those most in need and those most in danger of exploitation by employers. For the IMF of course, lowering the minimum wage by €1 was all about helping Ireland's competitiveness, pushing down wages across the economy and slashing unit labour costs.
It was also all about opening up certain sectors to the unemployed where the current minimum wage is preventing employers from taking on additional staff.
Unfortunately the IMF and the new government inhabit different ideological worlds. So in this isolated case, an existing agreement is being ripped up not just because of political expediency, but because of real economic differences. It will still infuriate everyone else though.