DUBLIN — At 2 a.m., with time for compromise running out, the Irish prime minister finally presented his emergency plan for the floundering economy to the country’s trade union leaders.
He proposed an average 7 percent reduction in gross pay for bureaucrats, teachers, police, firefighters, road cleaners and everyone else on the public payroll, in the form of a levy to finance their pensions.
He made clear that without an agreement the government would do it anyway.
Inevitably the union leaders said “No.” They couldn't sell it to their members.
At 4 a.m. the delegates acknowledged that Ireland’s unique social partnership had broken down; they left the government buildings, and staggered off through the driving sleet to get some sleep.
This afternoon in the Irish parliament, Dail Eireann, a haggard-looking Taoiseach Brian Cowen announced that the government would legislate immediately for his proposals.
With his bleary-eyed finance minister Brian Lenihan beside him, he spelled out other measures to cut expenditures by 2 billion euros (about $2.6 billion) this year, including reduced fees to doctors and lawyers on state contracts, a smaller child care supplement for parents and a reduction in overseas development aid.
Cowen then appeared on television at prime time to make what amounted to a state of the nation address.
“We are experiencing the most profound economic crisis in 70 years,” he intoned solemnly. “The Irish economy is suffering from the aftermath of a large housing and construction boom and a loss of competitiveness … exacerbated by the decline in the value of sterling (the pound) relative to the euro (Ireland’s currency).”
Declaring what amounted to a national emergency, he warned that, “We are borrowing half our day-to-day expenses for this country for the course of this year.”
Ireland’s international creditworthiness is at stake with the emergence of a gap of 20 billion euros (about $25.7 billion) between revenue and expenditure this year.
Ireland was the first European country to go into recession in the current global downturn, and its economy is forecast to contract by an unprecedented 10 percent this year.
But rarely has a developed country been asked to swallow such harsh medicine as Cowen prescribed.
In a typical case, a couple made up of a firefighter and a teacher would have to forfeit 5,000 euros (about $6,422) of their gross joint pay of 60,000 euros (about $77,000).
The country’s trade union leaders will meet in the coming weeks to decide whether they will follow French trade unionists and organize strikes.
David Begg, the Irish Congress of Trade Unions general, warned of a “revolution” from lower-paid public workers.
Already there are signs of social unrest in a country where the morale of the people, according to Enda Kenny, leader of the main opposition party Fine Gael, is “at a historic low.”
Teachers, pensioners and students have staged separate protests at government cutbacks in recent months. Meanwhile, hundreds of workers at bankrupt Waterford Crystal are in the fifth day of a sit-in at the plant in Waterford to protest the layoffs of 480 employees and the loss of their pension entitlements.
Yesterday former prime minister Bertie Ahern was jostled by students at Galway University protesting the planned introduction of college fees. Ahern was forced to abandon a public debate.
Such incidents are rare in Irish public life, but there is growing outrage against the politicians and the bankers perceived to be responsible for Ireland’s mess.
With calls for everyone — including those financially well off — to share the pain, highly-paid broadcasters on RTE, the government-subsidised TV and radio station, volunteered to take a 10 percent pay cut.
The ramifications of the economic crisis are being felt across Irish society: In the private sector there are now 300,000 unemployed. Some 10,000 people are losing their jobs every month and unemployment is predicted to rise from 6 percent to 10 percent this year.
Many developers who paid inflated prices for land at the height of the property boom are deeply indebted to the banks for sites they cannot exploit. On several major building sites, motionless cranes tower over the skeletons of office blocks draped with giant canvasses depicting what the finished buildings will look like. One prominent developer, Mike Wallace, admitted on Irish television that he is not able to pay interest on his bank loans, and said he believed other developers were in the same boat.
Businessmen who borrowed heavily and cannot meet repayments are being publicly shamed.
Oisin Fannin, former chief executive of broadband supplier Smart Telecom, was ordered by a judge to surrender his stately home when he failed to maintain payments on an 8.6 million euros (about $11 million) loan from Anglo Irish bank.
Last week, in a major setback for high-profile developer Sean Dunne, the national planning board rejected as too obtrusive his 1.5 billion euro (about $1.9 billion) high-rise scheme for the wealthy Dublin suburb of Ballsbridge.
Dunne paid 350 million euros (about $450 million) for a large site, including Jurys and Berkeley Court hotels, to create a fashionable quarter “like Knightsbridge” in London. Now the property is worth about half of that, he can do nothing with it, and he has massive debts with the banks.
The setback for Dunne, wrote Irish Times journalist Frank McDonald, a veteran critic of Dublin’s profit-driven development, “officially buried the Celtic Tiger.”
Or as Enda Kenny put it in the Dail today, “Developers and bankers are bust. The trade unions have little to offer. The game is up.”
Other GlobalPost dispatches about Ireland's economy:
In midnight call, Cowen nationalizes Anglo Irish Bank
http://www.globalpost.com/dispatch/ireland/090203/ireland-the-game