THE IRISH Congress of Trade Unions (Ictu) has said the Government should not tighten expenditure until the economy begins to recover.
Ictu unveiled " A Better Fairer Way", its updated 10-point plan for national recovery yesterday.
The strategy also proposes a third rate of tax on higher earners and opposes social welfare cuts.
It recommends the Government should lengthen its adjustment period and reduce its debt by 2017 instead of 2013.
Ictu said that cutting spending too quickly could collapse the economy as well as key public services.
Congress general secretary David Begg said he feared that reducing debt could bring about a “severe deflationary shock on the economy not unlike Japan”.
“Ireland should not engage in fiscal tightening until the economy begins to recover,” he said.
The Department of Finance was no longer arguing that Ireland was not able to borrow money but was arguing their concern about the level of debt servicing, Ictu president Jack O’Connor said.
Ictu warned that wage cuts could also cause deflation. “You could get a negative kickback as domestic demand adds to deflationary shock,” Mr Begg said.
Congress argued against cutting wages across the economy in a move to improve competitiveness. Such cuts “make no sense at all” and advocates are “unable to produce much evidence”, Mr Begg said.
Ictu proposes an accord which matches medium-term wage cut trends with competitor countries.
A third tax rate aimed at the wealthy would be “up around 54 per cent” and would demonstrate that “ the people who are best able to make a contribution are the people who are seen to do it”, Mr Begg said.
The plan argues against cutting social welfare rates in a crisis.
“Going after people like that for money is wrong and crosses a threshold of decency,” Mr Begg said. Cutting public service provision is also opposed in the plan as it would make no sense and could “fatally undermine” health and education services.
It reiterates earlier proposals for a €1 billion fund to promote job sharing, and a national recovery fund for infrastructure projects which would boost employment.
However, Mr Begg said the Government had not shown any interest in the jobs fund.
“We haven’t been able to interest the Government in this. They seem to have set their face against it.
“However, there is a reasonable body of evidence now as to the efficacy of these schemes,” he said.
Measures to protect households and those in severe debt were also proposed, including an office for indebtedness.
The plan suggests giving people up to three years free from legal threats to sort out their fiscal problems. It also wants the Government to tackle the pension crisis, reform the banking industry and introduction of legislation on workers’ rights.
Many of the same issues were raised in an an earlier version of its 10-point plan which was launched in February.
New proposals in yesterday’s plan included lengthening the debt adjustment period, protecting vital public services and maintaining social welfare rates
Since launching the plan in February, Mr Begg said there had not been “any move towards our position”.
He felt the Government was “somewhat more receptive” in its last conversation with Ictu. However, it was a “big jump to say that would translate into positive concessions”.
Mr O’Connor asked how the Government can confidently assure the European Commission that projected targets can be reached “given that we are not going to roll over” in relation to pay cuts.
A national agreement is “a key ingredient” in successfully emerging from the crisis, Mr O’Connor said.
