The political challenge for the Government is to hold its nerve on the public service pay issue, writes Stephen Collins
THE COLLAPSE of talks on a new national pay deal has added to Brian Cowen's woes, coming hot on the heels of the Lisbon referendum defeat, the economic downturn and the resulting problems with the public finances.
After the euphoria of taking over the Taoiseach's office three months ago, Cowen has been beset by one problem after another, as the long boom that created the Celtic Tiger economy came to a sudden end.
Still, the outcome of the pay talks could have been worse. If in his desperation to get a deal, the Taoiseach had sanctioned an unaffordable pay rise, then the country might well have been on the slippery slope back to the 1980s.
Now the unions and employers, as well as Government, will have to come to terms with what to do in the face of the reality that Ireland is slipping into recession.
There is still a slim chance that the talks can be rescued, as the breakdown was amicable, but even if that doesn't happen the widely forecast descent into industrial chaos is by no means inevitable.
Ireland is a much different place in 2008 than it was in the mid-1980s. The culture of confrontation between employers and unions is long gone in most parts of the private sector, where workers don't have the luxury of job security.
Politically, the challenge for the Government will be to hold its nerve in the area over which it has direct control, pay and conditions in the public service. With the public finances rapidly deteriorating, Cowen simply cannot afford to preside over unsustainable pay rises for public servants.
There are parallels with the position Charles Haughey found himself in when he took office at the end of 1979 and faced difficult decisions about how to deal with the mess created by his predecessor, Jack Lynch, in relation to the public finances.
In a television address to the nation Haughey famously pointed out that the country was living beyond its means. He then went on to funk the difficult decisions required to get the economy back on the rails.
Cowen is in a similar position in that all the chickens created by the inability of his predecessor, Bertie Ahern, to take tough decisions during a time of plenty are now coming home to roost in a time of austerity.
The Taoiseach will ultimately be judged on whether he gets the public finances right rather than the absence of a national pay deal.
The package of savings announced by Cowen and the Minister for Finance, Brian Lenihan, a month ago is already looking threadbare, and more fundamental decisions will be required in the autumn.
In the December budget the two men will have to devise a package of real spending cuts allied to extra borrowing.
They will also have to consider the possibility of tax increases if they are to keep the public finances from spinning out of control.
In that context tax increases on a beleaguered workforce in order to fund pay rises for protected public sector workers would be deeply unpopular. Tax increases to fund essential social services, in circumstances where the pain was being shared equally by all workers, would be a different matter.
The main Opposition parties may have cause to be thankful that they did not win office last year, considering the economic mess they would have inherited.
They now have an opportunity to capitalise on the Government's difficulties, particularly as a significant proportion of those difficulties are directly attributable to the financial and economic policies followed by Cowen and his colleagues.
Fine Gael finance spokesman, Richard Bruton, has been pointing out for the past few years that the Government has been contributing to inflation by repeatedly taking the soft option and presiding over an unprecedented increase in public spending.
With Government mismanagement part of the problem, Fine Gael and Labour can hardly be expected to help Cowen out of his difficulties by offering a Tallaght strategy as some on the Government side have suggested.
The challenge facing the Opposition, though, is to rise above sterile criticism and to come up with a constructive response that points the right way forward, while still holding the Government to account.
Taking the soft option of siding with the range of vested interests who will now pursue their own agendas relentlessly will not do the Opposition parties any good in the long term.
Prodding the Government in the right direction while offering an alternative vision is the task that confronts them.
Ultimately, though, it is the Taoiseach who has the responsibility to chart the way of the current mess.
With three of four years to go before an election, the one advantage he has is the luxury of time.