Monday 20 February 2017

Edward Walsh: We need a strong government to resist irrational pay claims

A rejuvenated Ireland is once again the poster boy of the EU, but the future is unpredictable, writes Edward Walsh

Edward Walsh

Published 10/04/2016 | 02:30

ECONOMIC FORTUNES: Ajai Chopra, left, Deputy Director of the European Department of the IMF, and a colleague pass a beggar as they make their way to the Central Bank for crucial talks with the government in November, 2010. Photo: AP
ECONOMIC FORTUNES: Ajai Chopra, left, Deputy Director of the European Department of the IMF, and a colleague pass a beggar as they make their way to the Central Bank for crucial talks with the government in November, 2010. Photo: AP

By the year 2000 Ireland had become the fourth most competitive country in the world. Growing at 11pc, the economy was the most successful in the EU. There was full employment. The budget was in surplus. Public debt, at around 20pc, was, after Luxembourg, the lowest in the EU.

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Less than a decade later, Ireland was insolvent and in the hands of the Troika. Competitiveness had plummeted by 35pc, unemployment was growing towards 15pc. The public sector pay bill had become so great and social welfare payments so generous that Ireland became bankrupt and one of the EU's most indebted countries.

During the preceding years of mismanagement, public pay policy was ceded to an unelected group: Social Partnership. Annual pay awards were made, unrelated to productivity or competitiveness, and in the decade, while Germany limited growth of public spending to 8pc, Ireland astonished international observers by permitting spending to grow by 120pc. Public sector wages surged upwards to amongst the highest in the EU.

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