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ACTION EUR-12
INFO OCT-01 IO-11 ISO-00 CIAE-00 DODE-00 PM-04 H-02 INR-07
L-03 NSAE-00 NSC-05 PA-01 PRS-01 SP-02 SS-15 USIA-06
EB-07 COME-00 TRSE-00 CIEP-01 OMB-01 /079 W
--------------------- 128345
R 041719Z MAR 76
FM AMEMBASSY DUBLIN
TO SECSTATE WASHDC 7678
INFO AMEMBASSY BONN
AMEMBASSY BRUSSELS
RUDKPNQMAMEMBASSY COPENHAGEN 508
AMEMBASSY LONDON
AMEMBASSY LUXEMBOURG
AMEMBASSY PARIS
AMEMBASSY ROME
AMEMBASSY THE HAGUE
USMISSION USEC BRUSSELS
USMISSION GENEVA
USMISSION OECD PARIS
USMISSION NATO BRUSSELS
AMCONSUL BELFAST
C O N F I D E N T I A L DUBLIN 0433
E.O. 11652: GDS
TAGS: PFOR, PINT, EI
SUBJ: IRISH POLITICAL/ECONOMIC SITUATION
1. ON THE EVE OF PRIME MINISTER COSGRAVE'S OFFICIAL VISIT WE
THOUGH IT MIGHT BE USEFUL FOR BACKGROUND PURPOSES TO SEND A BRIEF
SUMMARY OF THE CURRENT POLITICAL AND ECONOMIC SITUATION.
2. POLITICAL: COSGRAVE'S TENURE IS RATHER SECURE, WE BELIEVE,
FOR AT LEAST THE BALANCE OF 1976, ALTHOUGH THERE ARE ENOUGH
UNCERTAINTIES TO KEEP LIFE INTERESTING FOR THIS COALITION GOVERNMENT.
THERE IS NO IMMEDIATE THREAT TO THE GOVERNMENT MAJORITY OF THREE,
AND THERE IS EVEN A CHANCE THAT THE GOVERNMENT MIGHT INCREASE ITS
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MAJORITY TO FOUR IN AN UPCOMING BYELECTION. HOWEVER, THE POLITICAL
EXPERTS SAY THAT FIANNA FAIL (OPPOSITION PARTY) WILL PROBABLY
RETAIN THE EAST DONEGAL SEAT LEFT VACANT BY THE FEBRUARY 29
DEATH OF FRONT-BENCHER LIAM CUNNINGHAM.
3. ALWAYS KEEPING IN MIND THE NORTHERN SITUATION, WHICH IS A
CONSTANT UNDERPINNING OF ALMOST ALL POLITICAL ACTIVITY HERE AND
COULD ENGULF THE REPUBLIC IN "DOOMSDAY" AT ANY TIME, THE MAJOR
POLITICAL DIFFICULTIES FACING COSGRAVE ARE 1) THE BLEAK ECONOMIC
PICTURE, WHICH WILL CAUSE MUCH STRAIN IF IT DOES NOT EASE BY THE
END OF THE YEAR, AND 2) THE STRAIN OF TRYING TO MAINTAIN A COALITION
OF TWO RATHER DISPARATE PARTNERS. THESE TWO FACTORS ARE BOTH
INVOLVED IN TWO CURRENT POLITICAL DISPUTES RELEASING MUCH SOUND
AND FURY IN THE DAIL AND PRESS, I.E.:
--THE EQUAL PAY AMENDMENT. THIS IS MORE EMBARRASSING THAN
CRUCIAL FOR THE GOVERNMENT. BECAUSE OF ITS VERY BAD
FINANCIAL SITUATION THE GOVERNMENT HAS HAD TO GO FOR AN
AMENDMENT TO ITS LEGISLATION ON EQUAL PAY, CLAIMING THAT
NEITHER THE PUBLIC OR PRIVATE SECTORS CAN AFFORD IMPLE-
MENTATION JUST NOW. UNFORTUNATELY THE EC COMMISSION WILL
NOT GIVE AN EXCEPTION TO IRELAND AND THUS THE COUNTRY STANDS
IN OPEN VIOLATION OF ITS EC COMMITMENTS ON EQUAL PAY AND
IS APPARENTLY THE ONLY ONE OF THE NINE SERIOUSLY IN DEFAULT.
THIS IMBROGLIO, FEATURING STRONG WORDS BETWEEN THE IRISH
FINANCE MINISTER AND EC HEALTH COMMISSION HILLERY (FROM
IRELAND'S OPPOSITION PARTY, FIANNA FAIL) TAKES UP MANY
OF THE CURRENT HEADLINES AND, OF COURSE, IS BEING USED
BY THE OPPOSITION. AT THIS MOMENT IT SEEMS THAT THE
GOVERNMENT WILL HAVE TO GIVE IN AND SOMEHOW FINANCE EQUAL
PAY, ESPECIALLY SINCE THE JUNIOR COALITION PARTY (LABOR) IS
STRONGLY IN FAVOR OF EQUAL PAY.
--MUCH MORE SERIOUS IS THE OPPOSITION BY THE TRADE UNIONS
TO THE KEY UNDERPINNING OF THE FRAGIL IRISH BUDGET, I.E.
A 1976 "PAY PAUSE." THE IRISH CONGRESS OF TRADE UNIONS,
MEETING FEB. 25, OVERWHELMINGLY REJECTED THE IDEA OF A PAY
PAUSE AND WILL SHORTLY START NEGOTIATIONS FOR A NEW WAGE
AGREEMENT (THE OLD ONE EXPIRES IN STAGES, BEGINNING IN APRIL).
ON THE GOVERNMENT SIDE COSGRAVE HAS VOWED THAT THERE WILL
BE A STATUTORY PAY PAUSE IF THE UNIONS WILL NOT ACCEPT A
VOLUNTARY ONE. CONTRACTS CLOSE TO HIM TELL US THAT COSGRAVE
IS DEADLY SERIOUS ON THIS. IF IT COMES TO A STATUTORY PAY
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FREEZE, THE UNION LEADERS WILL BE OFF THE BURNER BUT THE
POLITICIANS OF THE LABOR PARTY WILL BE IN THE FIRE. THIS
SMALL AND DIMINISHING PARTY CANNOT AFFORD TO ALIENATE ITS
MAJOR CONSTITUENCY. IF LABOR DOES BREAK ON THIS ISSUE THEN
COSGRAVE WILL HAVE TO GO THE COUNTRY AS HE DOES NOT HAVE
ENOUGH SEATS TO MAINTAIN A MINORITY GOVERNMENT. AT THE
MOMENT WE DO NOT KNOW HOW THIS WILL BE SORTED OUT, BUT IT
IS PROBABLE THATCOSGRAVE IN THE END WILL BE FORCED TO ACCEPT
A MODESTWAGE AGREEMENT, AND FINANCE MINISTER RICHIE RYAN
WILL BE FORCED TO REVISE HIS BUDGET AND RAISE MORE MONEY
SOMEWHERE. IF THE UNLIKELY HAPPENS AND AN ELECTION IS
EITHER FORCED OR COSGRAVE BEGINS TO BELIEVE THINGS WILL
BE WORSE IN 1977 (HE MUST HAVE AN ELECTION MY MARCH 1978),
THEN WE COULD NOT NOW PREDICT THE OUTCOME -- IF THE COALITION
GOT BACK TOGETHER THE ELECTION WOULD BE CLOSE AND WOULD
HINGE ON A FEW TRANSFER VOTES IN IRELAND'S COMPLICATED
ELECTORAL SYSTEM. IN ANY EVENT THERE WILL BE LITTLE
BASIC CHANGE IN EITHER DOMESTIC OR FOREIGN POLICY IF FIANNY
FAIL COMES BACK INTO POWER, AT LEAST SO FAR AS US INTERESTS ARE
CONCERNED.
4. THE NORTH: COSGRAVE WILL HAVE A "SUMMIT MEETING" WITH WILSON
IN LONDON THIS FRIDAY, PRIMARILY TO DISCUSS THE NORTHERN SITUATION.
WE HAVE BEEN TOLD THAT HIS MAJOR MESSAGE TO WILSON WILL BE THAT
HMG MUST DEVISE SOME SCHEME TO KEEP POLITICS ALIVE IN NORTHERN
IRELAND, OTHERWISE THE PARAMILITARIES WILL STEP INTO THE VACUUM.
UNFORTUNATELY COSGRAVE WILL NOT HAVE ANY SPECIFIC IDEAS, INSOFAR
AS WE KNOW, AS TO HOW THIS IS TO BE DONE. ON THE PART OF THE GOI
IT IS EXPECTED HE WILL PLEDGE AGAIN FULL SUPPORT FOR ANY HMG EFFORTS,
PARTICULARLY IN THE SECURITY FIELD, AND THE GOI'S RECORD IN THIS
AREA HAS BEEN VERY GOOD. JUST LAST WEEK, FOR INSTANCE, JUSTICE
MINISTER COONEY ANNOUNCED THAT PRISON SENTENCES FOR IRA MEMBERSHIP
WOULD BE DOUBLED, GOING FROM TWO TO FOUR YEARS. ON NORTHERN IRELAND
IN GENERAL, THE GOI REMAINS GLUMLY PESSIMISTIC, BUT AFTER SIX YEARS
OF SMOLDERING CRISIS THERE IS A GENERAL RELUCTANCE HERE TO BELIEVE
THAT THE SITUATION WILL DETERIORATE ALL THE WAY TO CIVIL WAR
WHICH WOULD EMBROIL THE ISLAND. HOWEVER, THIS POSSIBILITY IS
ALWAYS IN THE BACK OF THE MIND FOR PERSONS SO STEEPED IN HISTORY AS
COSGRAVE. THERE IS ALSO A CERTAIN TENSION AND FRUSTRATION VIEWING
THE SITUATION FROM DUBLIN, BECAUSE IN FACT THERE IS LITTLE THE
GOI CAN DO EXCEPT COOPERATE ON BORDER SECURITY.
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5. ECONOMIC: IRELAND'S SMALL (ABOUT $6 BILLION GNP) AND OPEN
ECONOMY HAS BEEN SERIOUSLY BATTERED BY THE ENERGY CRISIS AND
THE ENSUING WORLD-WIDE RECESSION. UNEMPLOYMENT HAS REACHED
12 PERCENT OF THE REGISTERED WORKFORCE, WHILE INFLATION IN 1975
WAS IN THE NEIGHBORHOOD OF 24 PERCENT. IN AN ATTEMPT TO KEEP
THE ECONOMY AFLOAT THE GOVERNMENT HAS FOLLOWED A GENERALLY
EXPANSIONARY FISCAL POLICY THAT HAS RESULTED IN LARGE DEFICITS
THAT MUST NOW BE FINANCED AT HIGH INTEREST RATES. CURRENTLY,
IRELAND IS SEEKING THROUGH THE EC FOREIGN LOANS TOTALING ABOUT
$600 MILLION. THE IRISH ECONOMY NOW APPEARS TO BE STARTING A
SLOW RECOVERY FROM THE RECESSION BUT VERY LITTLE IS EXPECTED IN
THE WAY OF SIGNIFICANT IMPROVEMENT BEFORE THE END OF THE YEAR.
THE NEW BUDGET ANNOUNCED IN JANUARY CALLS FOR MORE EXPENDITURE
TO STIMULATE THE ECONOMY, BUT IT RAISED MANY TAXES TO CHECK THE
INCREASE IN THE NATIONAL DEBT.
6. THE UNITED STATES HAS A SMALL -- BUT IMPORTANT -- STAKE IN
THE IRISH ECONOMY. TOTAL US INVESTMENT IN IRELAND IS CURRENTLY
ESTIMATED AT ABOUT $600 MILLION. US EXPORTS TO IRELAND IN 1975
AMOUNTED TO ABOUT $235 MILLION, WHILE IRISH EXPORTS TO THE US
TOTALED APPROXIMATELY $150 MILLION. US TOURISM IS IMPORTANT TO
IRELAND: SOME 200,000 US VISITORS WENT TO IRELAND IN 1975, AND
US AIRLINES CARRIED A LARGE PART OF THE TRAFFIC. SEVERAL MAJOR US
BANKS HAVE STARTED OPERATIONS IN IRELAND AND ARE MAKING A
CONTRIBUTION TO THE IRISH ECONOMY. THESE INCLUDE BANK OF
AMERICA, FIRST NATIONAL CITY BANK OF NEW YORK, FIRST NATIONAL
BANK OF CHICAGO AND CHASE MANHATTAN BANK.
CURLEY
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