Irish government looks at new attempt for pay deal with unions

Government plans to make deeper budget cuts while avoiding the kind of industrial unrest seen in other euro zone countries were upset when a majority of public sector workers last week refused to extend a three-year-old pay accord.

The rejected deal - which proposed pay reductions for higher earners, longer working hours and cuts in premium payments - sought to save a further 1 billion euros until 2015 as Ireland seeks to exit its EU-IMF bailout this year.

Following discussions at cabinet on Tuesday, a government statement said the savings, including 300 million euros pencilled in for this year, were still needed and that it would ask the country's labour relations mediator to see if there is a basis for a deal.

Ireland's Labour Relations Commission (LRC) successfully brokered the first so-called Croke Park pay deal in March 2010, where a leaner public service was promised in return for no more pay cuts or forced redundancies.

The industrial relations body was tasked with making contact with the trade unions in the coming days, the government said. An agreement must be in place by July if it to secure the 300 million euros of savings required this year.

Ministers had threatened to unilaterally cut pay but the prospect of strike action and the precarious position of the junior government party Labour, closely tied to the unions and suffering in the polls, has seen it step away for now.

Trade unions representing teachers, who account for around a quarter of all Irish public sector workers, will ballot members next month over strike action if the government does follow through on threats to cut their wages.

Unions have also proposed that savings from a bank debt deal the government struck with the European Central Bank (ECB) earlier this year should be used to ease the burden on its members.

However, Finance Minister Michael Noonan said on Tuesday that Ireland would invest any spare cash in its economy if it has the capacity to do so once targets under an EU/IMF bailout are hit.

(Reporting by Padraic Halpin)