Troika targets top public execs in savings plan
Croke Park deal under spotlight in attempt to tackle €20bn wage bill
Published 22/01/2012 | 05:00
TOP-LEVEL public sector executive salaries are among a range of targets for savings being considered by Ireland's troika bosses, the Sunday Independent can reveal.
The troika -- the European Commission, the European Central Bank and the International Monetary Fund -- will this year also force the Government to open up the legal and medical professions to competition to bring about lower prices for consumers.
In the wake of Ireland's latest successful troika review, senior government sources have confirmed that there is now a realisation that there are "far too many managers" within the public service, and that a major rationalisation of senior grades is likely before the end of the year.
Troika bosses Istvan Sekely of the EC, Klaus Masuch of the ECB and Craig Beaumount of the IMF are refusing to "give up" on making savings in the wage bill, given that it accounts for so much of government spending.
With almost 7,000 public sector workers earning more than €100,000, troika sources have confirmed to this newspaper that top-level pay within the public sector is to be examined very closely to see if "further potential savings can be realised".
The troika is also concerned at the "potentially distorting impact" these high salaries are having on salaries in the private sector.
If anomalies are found, the troika will recommend to the Government to implement changes to achieve savings.
"This is an area we want to look further in two directions. Firstly, are there savings to be made? Also, we want to look at wage-setting levels and their impact on the private sector," a source said.
"Because whatever you do in the public sector has an impact on the private sector. And once we are done examining in this area, we will make recommendations to the Government," the source added.
In terms of the legal and medical professions -- the so-called sheltered sectors -- the troika is clear they have to be opened to competition to force prices down for consumers.
According to the troika, the sheltered parts of the economy need to be open to competition. "I'm talking about the medical profession, the legal profession -- these are major parts that need to see major changes in work practices and prices," a source said.
The troika is also of the view that the private sector has already "done its part" in terms of becoming competitive since 2008, particularly in the hospitality, retail and tradable sectors. These areas have made the necessary painful adjustments to regain the competiveness that was lost during the heady days of the boom between 2004 and 2008.
On the increasingly controversial Croke Park deal, which guarantees public sector pay and jobs until 2014, the troika insisted that it must deliver real savings and reforms, or it will have to be reconsidered.
Troika sources have said that if they don't see the savings being realised soon then it has to be looked at.
Troika bosses are adamant that they cannot "give up on" the public sector wage bill -- €20bn a year -- because it makes up so much of government spending.
At present, the troika doesn't see a problem with the guarantees given to State employees on pay, but if there is any failure in terms of the delivery of reforms or savings, then it will intervene.
The troika is said to be impressed with the Government's commitment to ensuring such reforms and savings are achieved.
At the press conference at the end of the review on Thursday, differences once again surfaced between the ECB and the IMF over whether German and French bond-holders should be burnt.
The IMF has said it favours such a move while the ECB has been steadfastly opposed to any such move since 2008. So far, the ECB's view has won out. In an important clarification as to why this is the case, the Sunday Independent has been told that the ongoing support from the ECB of over €100bn to our financial system has been seen as crucial by all sides, and should not be jeopardised.
"You should see that differently," a senior source said.
"The programme is €85bn but then you have the ECB's exposure to the financial system, which is larger than that. We need their support, so we should do the programme that secures the support of the ECB. It is crucial. You cannot imagine our programme without ECB support. So we all have to accept the ECB's considerations."
In an important move, the troika has agreed to produce a joint policy paper on Finance Minister Michael Noonan's request to do away with the highly costly promissory notes, which cost €3bn a year, to cover the Anglo losses.
Core to Mr Noonan's argument is that Ireland's growing debt is close to being unsustainable, and we need to adjust our debt levels downward to allow growth if we are to recover.
The troika disagrees somewhat. It sees Ireland's debt as sustainable and points to increasing positive market sentiment toward the country. The troika firmly believes a return to the markets this year is very feasible.
Such is its belief that it contends that had the European debt crisis not erupted last year, Ireland would be back in the markets now.
Given the Government's commitment to ensuring the programme works, the troika is well disposed to helping Ireland reduce its debt, by restructuring how it is paid back. There is a belief within the troika that Ireland now deserves a bit of payback for all of its efforts.
The troika, now in weekly contact with the Irish Government by way of conference calls, usually on Mondays, is confident a mini-Budget will not be required during the year because of the worsening situation in Europe. But should a mid-year Budget be required, then it would not be the end of the world.
The troika has also been highly impressed with the quality of the Irish public administration, which has been described as one of our major selling points.
It also believes Ireland as a result of these tough reforms will be best placed of all European countries to grow quickly once the crisis abates.
But public sector reform and the viability of Croke Park is a real test. The clear message from the troika is that time is running out for it to justify its existence.