Irish unions resist wage cuts for competitiveness

* Union sees new wage deal recommending moderate rises

* New wage agreement would not apply to all companies -ICTU

* Opposes idea of cutting wages to boost competitiveness

DUBLIN, June 29 (Reuters) - Ireland's trade unions accept wages cannot increase as much as recommended in a deal with the government and employers last year but oppose wage cuts to boost competitiveness, Ireland's top union leader said on Monday.

David Begg, general secretary of the Irish Congress of Trade Unions, said ongoing negotiations will likely lead to a new national wage agreement recommending moderate wages rises and exemptions to companies that cannot afford to pay it.

"Overall the increases would be fairly moderate and they won't apply to all companies," Begg told Reuters in an interview.

A deal in September offered workers wage rises of 6 percent over 21 months, but Ireland has since entered a recession that the OECD expects to slash gross domestic product almost 10 percent in 2009, the biggest fall among its 30 member states.

An official at Moody's, the last agency to keep Ireland's top 'AAA' credit rating, told Reuters on Monday it was on the "borderline" of a downgrade. [ID:nHKG4206]

Begg, whose ICTU campaigns on behalf of 832,000 people including affiliates in Northern Ireland, said he disagreed with the view held by many economists that Ireland's recovery depends on its ability to boost competitiveness by cutting wages.

"Reducing wages as an instrument of competitiveness seems to be not very viable because of its deflationary implications," he said.

Wages have already fallen across much of the private sector but the government has found it more difficult to cut the earnings of its own employees.

PROTESTS

The cabinet in February imposed a pension levy on public sector workers and froze their pay to help reduce a budget deficit that could rise to 12 percent of GDP this year according to the International Monetary Fund.

But statistical data on Monday showed public sector earnings excluding health workers still rose 3.4 percent in the year to March, bringing average weekly earnings to 973 euros ($1,362).

Data last week showed Ireland was still the second richest country in GDP per capita terms last year among the EU's 27 member states despite being one of the first to go into recession. [ID:nLP416947]

The introduction of the pension levy sparked unusually large protests of 100,000 people in Dublin, but analysts say the depth of the recession will limit the unions' ability to strike to resist wage cuts.

"In the private sector there is no possibility of strikes," said Friends First Chief Economist Jim Power.

"In the public sector there is every possibility of strike because it's a sheltered part of the economy," Power said. "But going on strike in the current environment would be economic and financial suicide."

The government is looking for ways to cut spending by around 4 billion euros and agrees with the IMF that savings in sensitive areas such as social welfare are necessary.

According to local media ministers are split however over the extent to which unions should be consulted before making a move.

"Most of our engagement has been with the prime minister and he seems to favour a more inclusive approach to these issues," Begg said. "Whether his writ holds sway in the government or not I can't say." (Reporting by Andras Gergely; Editing by Toby Chopra)