UNIONS AND GOC REACH AGREEMENT, STRIKES CANCELED

UNCLAS ZAGREB 000271

SIPDIS

DEPARTMENT FOR EUR/SCE

E.O. 12958: N/A
TAGS: ELAB ECON PGOV HR
SUBJECT: UNIONS AND GOC REACH AGREEMENT, STRIKES CANCELED

REF: A. ZAGREB 261

B. ZAGREB 252


1. SUMMARY: Union and GOC representatives have reached an
agreement on public sector wages. Based on the agreement,
union leaders called off their one-day-old strike and the
demonstration planned for May 16 (Ref A),and union members
have returned to work. According to the agreement, public
servants will accept a six percent wage cut effective the day
the agreement is finalized, and the government will raise pay
by six percent when Croatia achieves two consecutive quarters
of two percent real GDP growth. Based on the terms of the
agreement and current economic forecasts, significant
expenditures for wage increases will likely hit the
government in 2011, in the run-up to the next parliamentary
elections. End summary.


2. Union and GOC representatives negotiated late into the
night again May 13, but finally reached an agreement on
public sector wages. Both sides have "initialed" the
agreement. The unions now have 30 days to poll their members.
Union leaders told the press they would sign the agreement if
the majority of members support the terms; otherwise, they
will begin negotiations again. In the meantime, union
leaders have called off the one-day-old strike and the
demonstration planned for May 16, and members are back to
their regular work hours. The unions involved represent
workers at public institutions in education (including
universities),healthcare, research, culture, and social
services.


3. According to the agreement, the unions will accept the six
percent pay cut, returning base salaries to 2008 levels. The
government will raise salaries by six percent when Croatia
achieves two consecutive quarters of two percent real GDP
growth. This matches the terms accepted by government
administration workers in March (Ref B). Other provisions of
the agreement, however, specify in detail a multi-step
process for adjusting public sector pay for inflation and
bringing it closer to parity with national averages over the
next several years up to 2016. The GOC also agreed to adjust
wages for inflation in October 2010 if the two quarters of
two percent GDP growth required for the six percent raise
have not been achieved by that time. Conversely, the
agreement specifies delays in wage increases in the case of
negative GDP growth.


4. In public statements, both union and government leaders
have declared the agreement a victory. PM Sanader said, "We
are all winners -- both the unions and the government." He
said the agreement achieves two essential goals: protecting
the people who work in the public sector and protecting
public finances.


5. COMMENT: With this agreement, the GOC has managed to
freeze its budget expenditure for public servant salaries for
2009 and much of 2010, based on current economic forecasts.
In exchange for this reprieve, the government could face a
difficult year in 2011, when various stipulated pay increases
will likely be triggered. The government did not push this
burden beyond the end of its mandate at the end of 2011. The
agreement avoids a public demonstration the day before the
May 17 local elections, but whether the ruling Croatian
Democratic Union (HDZ) can deliver on its new promises to
workers in 2011 may well influence parliamentary elections
scheduled for the end of that year. END COMMENT.
BRADTKE