IMF did not call for Croke Park review

Wednesday 20th June 2012

An International Monetary Fund (IMF) report to on Ireland’s progress under the ‘troika’ package says Ireland’s approach to public service pay has “helped keep industrial peace, protect frontline services, raise public sector productivity, and deliver agreed savings in a durable way.”

Contrary to some Irish media reports, the IMF did not call for further public service pay cuts or seek a review of the Croke Park agreement on equity grounds. Rather, it gives a broad endorsement of Irish Government policy, including the Croke Park deal.

The IMF report notes that the agreement relies on “voluntary reductions in employment accompanied by efficiency gains through enhanced flexibility” and says this has “delivered the budgeted savings while maintaining industrial peace which is critical to the implementation of other fiscal and structural reforms.”

Although the report says IMF staff see advantages in “further wage reductions, especially in terms of immediate savings,” it also notes that the Irish Government prefers “to maintain controls on hiring – but still meet the needs of frontline services – while pursuing savings in non-core-pay entitlements.”

It concludes that “Ireland has met all programme targets,” and the IMF is so relaxed about Croke Park that the deal was not even mentioned in its press release, which did find space to call for more financial sector reform, a new personal insolvency framework, stronger competition enforcement and assistance for job seekers.

In a commentary on public service pay, the IMF report agrees that recent increases in the cost of public service pensions mostly reflect demographic trends – a point repeatedly made by IMPACT and the Croke Park implementation body. This didn’t prevent media commentary implying that increased pension costs – and particularly once-off lump sum payments this year – had eaten into the €1.5 billion of savings achieved in the first two years of the Croke Park agreement.

The report of the Croke Park implementation body was clear that expected payroll savings of €3.3 billion between 2009 and 2015 take account of additional pension costs. It is equally adamant that the increase in pension costs is not due to Croke Park measures.

There have been virtually no enhanced pensions under the agreement and the vast majority of early retirements have been cost neutral, with pension payments reduced to reflect any reduction in service. The increase in the pension bill will instead result from factors like increased survival rates of existing pensioners and the demographic profile of the public service, which sees increasing numbers approaching retirement now because of substantial public service recruitment in the 1970s.