Irish unions reject pay deal, warn of trouble ahead

By Padraic Halpin

DUBLIN (Reuters) - A majority of Irish public sector workers rejected a new pay deal on Tuesday and warned the government against unilaterally cutting wages, giving it a headache as it seeks to exit an EU-IMF bailout later this year.

The government and the country's main unions agreed in February to extend a three-year-old pay deal that has been credited with avoiding the kind of industrial unrest seen in other euro zone countries hit by debt woes.

But the deal had to be approved by hundreds of thousands of union members and after only a handful of unions backed the new proposals, it needed the backing of SIPTU, the country's largest union, whose members account for some 25 percent of all workers.

It rejected the deal by a margin of 54 percent to 46 percent and its president warned the government that it would face a "major confrontation" if it went through with a threat to cut pay in order to make budgetary savings.

"The result reflects the deep and well justified sense of grievance among working people throughout the country and public service workers in particular," Jack O'Connor, one of the union leaders who negotiated the agreement, said in a statement.

"We urge the government not to proceed with legislation to cut the pay of public service workers as it would inevitably precipitate a major confrontation."

The update to the Croke Park agreement - named for the sports stadium in which the original deal was struck - proposed pay reductions for higher earners, longer working hours and cuts in premium Sunday payments.

This would save 1 billion euros (845.8 million pounds) over three years, a key part of efforts to reduce a large budget deficit under the country's 85-billion-euro European Union-International Monetary Fund bailout, and Prime Minister Enda Kenny said the savings still needed to be found.

Kenny said the government would reflect on the implications of the votes but analysts said his Labour Party junior partners in government, closely tied to the unions and suffering in the polls, would find it hard to stomach pushing through pay cuts.

"I think backbenchers are likely to balk at the prospect of legislating for pay cuts, not least given the recent electoral performance of the Labour Party," said Bill Roche, Professor of Industrial Relations at University College Dublin.

"If legislation did pass through, there's every prospect of confrontation on a very significant scale so I wouldn't rule out the Labour Relations Commission stepping back into the breach to try to get parties to sit down. That's frankly more palatable."

"DEFINITELY A SETBACK"

Public servants took wage cuts averaging 15 percent before the Labour Relations Commission helped negotiate the first Croke Park deal in March 2010, where a leaner public service was promised in return for no more pay cuts or forced redundancies.

The Irish National Teachers Organisation (INTO), which rejected the deal by a margin of more than two-to-one, suggested that the government use budgetary savings from a bank debt deal struck with the European Central Bank (ECB) to avoid pay cuts.

While investors have been impressed by Ireland's ability to avoid street protests and strikes, helping it return to capital markets last year, bond dealers said yields on Irish debt were unlikely to increase until things ratcheted up further.

"Investors have long questioned how Ireland has maintained the level of industrial peace it has, so this will be noted but clearly pictures of people taking to the streets would be much more significant," said Ryan McGrath of Cantor Fitzgerald.

"It's definitely a setback though."

(Reporting by Padraic Halpin; editing by Michael Roddy)

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Irish PM's party wins by-election, junior partner suffers

By Stephen Mangan

ASHBOURNE, Ireland (Reuters) - Irish Prime Minister Enda Kenny's Fine Gael party held its seat in a by-election on Thursday, but its junior coalition partner Labour was beaten into fifth place in a humiliating defeat.

Labour went into government for the first time since the late 1990s two years ago on a promise to end the previous administration's adherence to "Frankfurt's Way", an austerity plan the party said was dictated by the European Central Bank.

However the centre-left party has angered supporters by pursuing the tough austerity required under the country's EU/IMF bailout and its vote in the Meath East constituency collapsed to 4.6 percent from 21 percent last time.

Fine Gael's Helen McEntee captured 38.5 percent of the vote to win the seat left vacant when her father committed suicide last year. The coalition would have kept its record parliamentary majority even if she had lost.

"I voted for Labour last time out but will never vote for them again," said Abigail Flores, a mother-of-two living in Ashbourne, a town 20 km north of Dublin where so-called "ghost estates" lie unfinished after a spectacular property crash. She said she had no interest in voting this time around.

"I would have always voted for Labour and so would my parents and sisters but they've shown in the last two years that they're just spineless and are no different from Fine Gael or Fianna Fail. They don't actually stand for anything."

By fielding the daughter of the late junior minister Shane McEntee, analysts said Fine Gael sheltered itself somewhat from voter anger. Political dynasties are common in Ireland, Kenny won his first election 38 years ago after his father's death.

The fellow centre-right Fianna Fail, which dominated Irish politics before losing three-quarters of its seats in humbling elections held after it signed up to the bailout, came second after jumping to 32.9 percent from 19 percent two years ago.

A rise of just four percentage points to 13 percent for Sinn Fein, the only major party rallying against austerity, showed the limited Irish appetite for the type of populist political movements making inroads elsewhere in Europe.

"DIFFICULT DAY"

A lack of opposition to deep tax hikes and spending cuts has helped Ireland hit the targets set under its bailout and close in on getting off emergency EU and IMF assistance, a move cemented last month by a landmark 10-year bond sale.

But that has meant little to Labour's traditional working class support base which has been hit hard by high unemployment. State workers face fresh cuts in a new public sector pay deal.

"It's a difficult day for Labour, people are very angry out there and clearly the Labour Party has been singled out for the brunt of responsibility," Pat Rabbitte, a senior Labour minister, told the Today FM radio station.

"There's little point in trying to explain to the individual voter that bond prices are cheaper, that butters no parsnips as far as they're concerned."

Analysts said the loss poses little threat to the coalition and its austerity push as Labour, which has already seen five of its 38 MPs defect from the party, would be unlikely to leave government and force an election with support so low.

"It will make life a bit more uncomfortable but I can't really see what they can do to stem to flow other than to steady the nerves and hope that the economy turns around," said Eoin O'Malley, politics lecturer at Dublin City University.

(Writing by Padraic Halpin; Editing by Rosalind Russell)

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CORRECTED-Birds Eye names Irish company as the source of horse DNA find

DUBLIN (Reuters) - Frozen food maker Birds Eye said horse meat DNA found in two of its products came from an Irish meat processor that is part of one of Ireland's largest agricultural businesses.

Birds Eye was drawn into the scandal last month when a chilli con carne sold in Belgium was pulled off retail shelves after testing positive for horse DNA. That also prompted the withdrawal of its spaghetti bolognese and beef lasagne products.

The company said investigations had found its Belgian supplier Frigilunch NV had unknowingly sourced meat with horse DNA from Irish meat processor QK Meats.

"Our investigation has shown that Frigilunch NV (who supplied these products to us) was itself supplied meat with horse in it by an Irish meat processor QK Meats," Birds Eye said in a statement on Tuesday.

"In total we have tested 250 products across Europe and confirmed three products as containing horsemeat," Birds Eye said.

The horsemeat scandal erupted in Ireland after its food safety authority discovered horse DNA in frozen beef burgers and the Birds Eye investigation brings more unwanted attention on the country's reeling beef industry.

"All other meat suppliers to Frigilunch NV have been given the all clear through both Birds Eye's and Frigilunch NV's separate testing programmes," the statement said.

Private equity group Permira owns the Iglo Group whose frozen food brands include Birds Eye in Britain, Iglo, which trades across much of continental Europe, and Findus in Italy.

Birds Eye said tests showed its beef burgers, beef pies and beef platters sold in Britain and Ireland did not contain horse DNA.

QK Meats parent firm is the Arrow Group, which is privately owned by Irish businessmen the Queally brothers who own shares in one of Europe's largest food processors, Dawn Meats.

In response, QK Meats said it never knowingly incorporated horse meat into any of its beef products and is investigating the contamination.

(Corrects Frigilunch NV to Belgian from Dutch; Queally brothers hold Dawn Meats shares, not own company)

(Reporting by Stephen Mangan; Editing by Jon Hemming)

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