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FM AMEMBASSY DUBLIN
TO RUEHC/SECSTATE WASHDC 9772
INFO RUEHBL/AMCONSUL BELFAST 0884
RUCNMEM/EU MEMBER STATES

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 
------------------- 
 
¶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 
-------------- 
 
¶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 
-------------- 
 
¶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 
 
DUBLIN 00000076  002.2 OF 002 
 
 
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. 
 
-------------------------------- 
The Gentleman is Not For Turning 
-------------------------------- 
 
¶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