The Impact of the Eurozone Crisis on Irish Social Partnership

The first casualty of the economic crisis in Ireland was social partnership and centralised wage bargaining. Despite the fact that a consensual approach to socio-economic policy was the default position of the country’s political economy for twenty three years, the Irish government has so far pursued a unilateral rather than a negotiated adjustment. The policy constraints of European Monetary Union (EMU) and the narrow focus on public sector austerity, in the context of an unprecedented economic crisis, has undermined the capacity of the actors to engage in a strategy of social partnership. Internal devaluation has reinforced the liberal market orientation of Ireland’s public policy regime. The author will detail the failed attempt at a negotiated response to the crisis in 2009, the implicit reform strategy of the public sector agreement reached in 2010 and analyse the impact of de-centralised collective bargaining in the private sector. It concludes with an assessment on the future of Irish social partnership in the context of increased European integration, weakened trade unions and a changing role for the Prime Minister’s office. A centralised incomes policy is only likely to re-emerge in a period of economic and wage growth. 1. The Institutional Architecture of the Eurozone Labour market policy The most erroneous liberal-market premise of the EMU is the assumption that labour market actors, particularly trade unions, either do not exist or are too weak to resist competitive downward pressure on wages. The design of Europe’s shared currency is premised on the non-existence of organised labour (Crouch, 2000) and shares the neoclassical assumption that labour markets can and do operate in perfectly competitive markets. This implicit design of the monetary union assumes that if asymmetric shocks hit, national economies, regions and sectoral industries will automatically adapt through a reduction in labour costs. This reduction in labour costs is presumed to act as a functional equivalent to currency devaluations at a macro-level (see Hall and Gingerich, 2004). Currency devaluation traditionally externalised excessive endogenous labour costs to the main trading partners of a given national economy (Crouch, 2000). Devaluation and exchange rate adjustments acted as a cushion to avoid social dislocation when national economies became over inflated. This option