Irish Public Pay Accord Hangs on ‘Knife Edge’ as Unions Vote

Ireland’s most powerful labor union will deliver its verdict on the latest round of public sector pay cuts as soon as today, with the government threatening wider reductions should the plan be rejected.

SIPTU, which has over 200,000 members in all, is due to announce the result of its ballot about 2 p.m. in Dublin. That will feed into a wider union vote tomorrow on the proposals, which provide for at least a 5.5 percent pay cut for those earning more than 65,000 euros ($85,000 euros) a year.

The outcome remains on a “knife edge,” according to Dermot O’Leary, an economist at Goodbody Stockbrokers in Dublin. He said the agreement may pass by a majority of 50.2 percent to 49.8 percent.

Prime Minister Enda Kenny’s government has said it may legislate for across-the-board public sector pay reductions if the proposals are rejected. Ireland has avoided the large-scale strikes that have beset Greece and Portugal even after successive governments cut state workers’ pay by an average 14 percent since 2008.

“We’ve had a huge adjustment in terms of public sector spending and taxes, and despite that we’ve had quite harmonious relations,” O’Leary said in a phone interview. “This puts that to the test.”

Longer Hours

Under the proposals, government employees will also have to work longer hours and face overtime pay cuts. While eight unions have already rejected the agreement, the outcome of tomorrow’s vote will be determined by the result of ballots of larger unions such as SIPTU, the country’s biggest trade union. SIPTU leaders urged its members last month to back the deal.

Ireland is set to exit its 67.5 billion-euro bailout at the end of this year. A rejection of the pay agreement may have an impact on Ireland’s funding costs over time by increasing “political and industrial relations risks,” according to Goodbody’s O’Leary.

To contact the reporter on this story: Finbarr Flynn in Dublin at fflynn3@bloomberg.net

To contact the editor responsible for this story: Douglas Lytle at dlytle@bloomberg.net

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