While it has already been superseded in importance by other news, for which we even have the Sky-like marketing moniker SuperTuesday, RTE report on last night’s agreement between the Government and Public Sector Unions. It outlines how at least some of the pay cuts can be scraped back (the so called ‘route to the loot’) –
Under the proposals, brokered by the LRC, unions will cooperate with extensive cost-saving measures across the public service.
In spring 2011, there will be a review of the extent of sustainable savings secured, which will be independently verified by an Implementation Body.
If sufficient savings are identified, priority for reimbursement will be given to staff earning less than 35,000 a year.
However it is unclear what proportion of lost salary would be reimbursed and by when.
Using a simple prisoners’ dilemma game, one can easily show that the Government currently has all the incentives to run the economy deeper into depression. Such a move will ensure that the poisoned chalice the current Government passes to the opposition will be even more toxic, thus giving Fianna Fail stronger chances of election victory in the next 5 years.
In other words, if the Government does indeed sign up to the unions’-conjured ‘plan’ for ‘efficiency’-exit from the deficit, it will be implicitly acting to derail any hope of a fiscal and economic recovery, while optimising its own political objectives.
The agreement as outlined in the press seems reasonable, if sufficient savings can be found elsewhere in the public sector (e.g. by extending the working day, which would reduce overtime payments or via reduced numbers) pay cuts will be reinstated. However the government has already purchased the reform horse twice via benchmarking at this stage. The proof of the pudding will be in the eating. But at least I might be able to renew my passport now.
No bio, some books worth reading – The Rational Optimist: How Prosperity Evolves – Matt Ridley .
Crisis Economics: A Crash Course in the Future of Finance -Nouriel Roubini, Stephen Mihm