IRELAND'S SPRING OF DISCONTENT

UNCLAS SECTION 01 OF 02 DUBLIN 000076

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB PGOV EI
SUBJECT: IRELAND'S SPRING OF DISCONTENT

REF: DUBLIN 42

DUBLIN 00000076 001.2 OF 002


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Summary
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1. (SBU) Against a backdrop of rising unemployment, an increasing
budget deficit, nationalization of banks, and emigration, Ireland is
facing its worst year of industrial unrest since the 1980s. In
response to the deteriorating public finances (reftel),the Irish
government has announced a range of fiscal tightening measures,
including a public sector pension levy. The trade unions claim the
measure unfairly targets lower- and middle-income public servants
and have threatened industrial unrest. Several unions are holding
strike ballots in response to the levy and over 100,000 people
marched in a national demonstration on February 21 in Dublin,
something unseen since the havoc caused by industrial action in the
1980s. In the current economic climate, it is not clear that the
government will be able to resist the unions' demand to do away with
the pension levy.

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Economic Background
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2. (U) The global economic downturn has hit Ireland hard. The
unemployment rate rose to a 13-year high of 9.2 percent in January,
up from 8.3 percent in December 2008, and is rising. A 6.3 percent
public finances budget deficit in 2008 is estimated to have widened
to 9.5 percent in 2009. One bank has been nationalized, and the
Irish government has recapitalized two others to the tune of Euro
seven billion (USD 8.9 billion). Following this deterioration in
public finances, the government introduced a package of measures
aimed at generating savings of Euro two billion (USD 2.55 billion)
in 2009. Prime Minister Brian Cowen has attempted to secure a
negotiated agreement between the government, employers and trade
unions - the so-called social partners - on the package. (Note:
The series of agreements between the social partners dating back to
the 1980s established benchmarks for pay increases and set out
consensus positions on a host of social policies and were largely
responsible for industrial stability for the past 25 years. End
note.)


3. (U) However, talks between the social partners on the national
economic recovery program broke down on February 3. Unions refused
to agree to the government's proposed graduated pension levy, which
will reduce public-sector employees' incomes by up to ten percent by
diverting income into the government's pension fund scheme. The
unions described the levy as "onerous" but the government pushed
ahead with the levy anyway, with Cowen insisting that the savings
were a necessary first step to stabilize the public finances.
Leading trade unionists, incensed by the measure, argue that the
levy unfairly targets lower- and middle-income public servants and
have threatened mass industrial action.

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Unions See Red
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4. (SBU) Paul Sweeney, economic advisor to the Irish Congress of
Trade Unions (ICTU) which represents 832,000 workers in 57 unions,
told Emboff he believed the social partnership model is not dead but
is frozen for now. Sweeney said workers were willing to take pay
cuts for the good of the country, but the pension levy was unfairly
aimed at low- to middle-income earners. Sweeney was "surprised" at
the level of anger shown by many of the unions. As an answer to the
scheme put forward by the government, ICTU issued a ten-point plan
which includes a proposed 48 percent tax on high earners, full
public control of the banks, a three-year moratorium on house
repossessions, and a national recovery bond. The plan is based on
the work of a Swedish economist, Jens Henrikkson, who advised his
government when Sweden's banking sector collapsed in the early
1990s. Sweden's policies at the time, which proved successful, are
being widely studied by governments across the world.

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Days of Action
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5. (U) ICTU organized a national demonstration on February 21 in
Dublin. Following consultations with member unions, ICTU decided to
concentrate resources and attention on one major demonstration, as
the first step in a rolling campaign of action. Irish police
estimate that between 100,000 and 120,000 people marched through the
capital's center. It was the largest workers' protest since
December 2005, when a national day of protest organized by ICTU
against the exploitation of migrant workers and the displacement of
jobs in Irish Ferries, attracted over 40,000 people in Dublin and
100,000 nationwide. While much of the preparation for the protest
had focused on the public sector pension levy, in speeches to the
protestors, union leaders were keen to promote unity between public

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and private sector workers. Workers from Waterford Crystal and SR
Technics, recently closed private companies, figured prominently in
the march. ICTU's executive council meets on February 24 to
consider its next move following the protest march and the issue of
escalating industrial action will be on the agenda.


6. (SBU) Manus O'Riordan, Head of Research for the Service
Industrial Professional and Technical Union (SIPTU),Ireland's
largest union, representing 214,000 workers, told Emboff the march
showed that unions are still relevant in Ireland. He said there was
a unity of purpose between private and public sector unions and
that, while union leadership is prepared to resort to further labor
action, there is still a desire to engage with government to solve
the problem.


7. (U) The February 21 demonstration will be followed by other,
smaller actions. The 13,000 members of the Civil and Public Service
Union (CPSU) will mount a one-day strike affecting all Government
departments on February 26. On February 18, a CPSU demonstration
outside Government Buildings was attended by 4,000 people. Members
of the Public Service Executive Union, which represents 10,000
mid-ranking civil servants, are currently balloting on industrial
action. Workers at Dublin Bus, which announced 290 job losses on
January 16, will strike on Sunday, March 1, and have threatened
further action on March 8 and 9. The Irish National Teachers
Organization (INTO) said the government's fiscal measures were
"totally unacceptable" and warned of a "strong response" from the
union.

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The Gentleman is Not For Turning
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8. (SBU) On February 19, Finance Minister Brian Lenihan reiterated
his defense of the pension levy on all public-sector workers.
During a debate in the Irish Parliament on the legislation paving
the way for the measure, Lenihan said the levy was preferable to tax
increases and redundancies. The Irish government has said it will
not back down on its decision. However, following public pressure
they reversed several aspects of last October's budget. According
to our union contacts, the unions sense this weakness and believe
the day of national protest and threats of industrial action will
force the government to rescind the pension levy and implement the
union plan. Union leaders have also indicated that informal
contacts have been taking place both with the Government and
employers in recent days over a possible resumption of the social
partnership talks.

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Comment
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9. (SBU) Industrial action caused havoc in Ireland in the 1980s
(264,339 days were lost to industrial action in 1987, compared to
4,179 in 2008) when low paid workers felt they were bearing more
than their fair share of the correction in the public finances.
Nobody, including the unions, wants to return to those dark days.
However, the unions are under pressure from their members to act
against what they see as a grossly unfair pay cut. There is an
appetite for sustained industrial action among workers and a growing
anger among the Irish electorate at the government. Union leaders
sense the government's growing weakness and hope that the national
day of protest on February 21 forces a scrapping of the pension
levy. Facing rising unemployment, a banking crisis that's fast
becoming a political headache, local and European elections looming
in June, and abysmally low polling numbers, the government may be in
an accommodating mood.

FAUCHER