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EUROPEAN REVIEW

ISSUE 10 - Page 5

'Celtic Tiger' faces problems of prosperity

Following our feature on Poland (this page, issue 7) the European Review profiles one of our present EU partners and near neighbour, Eire, at a time when new-found prosperity is causing new problems.

OF ALL THE MEMBERS of the European Community it is arguably Eire that has benefitted most from membership. In the nineteen-eighties the country suffered from mass unemployment, falling living standards and huge debt; the economy was in crisis. However from about 1990 that began to change as foreign multi-nationals, particularly in the financial and information technology sectors began to invest heavily. High levels of educational achievement and benign tax regimes were cited as reasons for this development, but, whatever the cause the economy soon began to turn around. Eire recorded fantastic growth rates in the 1990s. According to the European Union statistical service, Eurostat, its Gross Domestic Product (GDP) grew by 11.1% in 1995, 8.6% in 1996 and 8.3% in 1997. These figures far outstripped any other Member State's with the next best in these years being Luxembourg on around 4%. As the Eurostat news release for 1998 put it 'GDP growth - Ireland way ahead'. For the first time, the organisation reported Eire 'came in above average' in terms of GDP per head, well above the United Kingdom figure. Despite these enormous gains the economy did not appear to be overheating. Inflation remained low, 1.1% in 1997 compared to an EU average of 1.8%.

OUTPUT & GROWTH IN IRELAND

As regards collective bargaining the labour market in general, and government employment policy, the new wealth brought a change of emphasis. The most significant employment trends were: the substantial rise in the number of women in employment; the significant growth in manufacturing employment, in the main due to inward investment, but also in indigenous industry; a sustained increase in service sector employment; and a significant expansion in part-time working and self-employment. Part-time work accounted for all of the net increase in employment between 1983 and 1993 but the expansion of employment since 1993 mainly involved full-time jobs. Trade unions, employers and government responded with a 'don't rock the boat' policy which sought consensus. Nationally negotiated inter-sectoral wage agreements tried to underpin economic growth. There were four national pacts up to the year 2000, each one taking into account a broader range of economic and social policies than its predecessor, and including new participants, especially those representing marginalised or disadvantaged groups. There was a general consensus that Ireland should not attempt to replicate the US/UK approach to labour market flexibility. Rather, many commentators argued that the best way to secure a strong national competitive advantage was to try and develop a high-wage, high-skill, high-innovation economy with adequate social protection.

Most employers stuck to the national agreements on wages but towards the end of the nineties there was evidence to suggest that some employers secured concessions from employees in terms of implementing wage freezes, wage cuts and new working practices while others - most notably in the pharmaceutical and chemical sector - payed wage increases above the agreed limits. In the social and labour legislation field Eire was quick to implement EU directives with laws such as the Organisation of Working Time Act, 1997, the Transnational Information and Consultation Act, 1996 and the Parental Leave Act, 1998.

The ethic of partnership became crucial to the country's economic success and as the last national agreement 'Partnership 2000' ran out this year, negotiations for a new one became intense. With the Economic and Social Research Institute (ESRI) forecasting a 7.25% rise in GDP in 2000 and a fall in unemployment to under 5% there

Bertie Ahern, the teflon Taoiseach

would seem to be a bigger cake to share out. There is some feeling in the Irish Congress of Trade Unions that although wages have been rising steeply, at roughly 5% in 1999, the lower paid have not benefitted as much from economic growth. The executive of the transport union ATGWU has come out against the proposed 'Programme for Prosperity and Fairness' for this reason.

The government, meanwhile, is intent on big tax cuts in this year's budget which the Central Bank of Ireland, the EU Commission and the ESRI regard as inflationary. It may be that as Eire reaches full employment more growth will result in the familiar problems of inflation and overheating. Already it is estimated that the prodigious increase in housing costs would add 2% to the official inflation rate if it was taken into account. It seems that just as Eire has begun to conquer her old problems, new ones are just beginning.

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